Correlation Between Collins Foods and ACDC Metals

Can any of the company-specific risk be diversified away by investing in both Collins Foods and ACDC Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Collins Foods and ACDC Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Collins Foods and ACDC Metals, you can compare the effects of market volatilities on Collins Foods and ACDC Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Collins Foods with a short position of ACDC Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and ACDC Metals.

Diversification Opportunities for Collins Foods and ACDC Metals

0.22

Correlation Coefficient

Collins Foods  ACDC Metals

Modest diversification

The 3 months correlation between Collins and ACDC is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and ACDC Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACDC Metals and Collins Foods is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Collins Foods are associated (or correlated) with ACDC Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACDC Metals has no effect on the direction of Collins Foods i.e., Collins Foods and ACDC Metals go up and down completely randomly.

Pair Corralation between Collins Foods and ACDC Metals

Assuming the 90 days trading horizon Collins Foods is expected to under-perform the ACDC Metals. But the stock apears to be less risky and, when comparing its historical volatility, Collins Foods is 4.23 times less risky than ACDC Metals. The stock trades about -0.34 of its potential returns per unit of risk. The ACDC Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5.10  in ACDC Metals on October 8, 2024 and sell it today you would earn a total of  0.40  from holding ACDC Metals or generate 7.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Collins Foods  vs.  ACDC Metals

Collins Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collins Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ACDC Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACDC Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, ACDC Metals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Collins Foods and ACDC Metals

The main advantage of trading using opposite Collins Foods and ACDC Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, ACDC Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ACDC Metals will offset losses from the drop in ACDC Metals' long position.

The idea behind Collins Foods and ACDC Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.