Correlation Between Capital Metals and Metals Exploration

Can any of the company-specific risk be diversified away by investing in both Capital Metals and Metals Exploration 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 Capital Metals and Metals Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital Metals PLC and Metals Exploration Plc, you can compare the effects of market volatilities on Capital Metals and Metals Exploration 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 Capital Metals with a short position of Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and Metals Exploration.

Diversification Opportunities for Capital Metals and Metals Exploration

-0.02

Correlation Coefficient

Capital Metals  Metals Exploration

Good diversification

The 3 months correlation between Capital and Metals is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc and Capital Metals 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 Capital Metals PLC are associated (or correlated) with Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of Capital Metals i.e., Capital Metals and Metals Exploration go up and down completely randomly.

Pair Corralation between Capital Metals and Metals Exploration

Assuming the 90 days trading horizon Capital Metals PLC is expected to under-perform the Metals Exploration. In addition to that, Capital Metals is 1.35 times more volatile than Metals Exploration Plc. It trades about -0.06 of its total potential returns per unit of risk. Metals Exploration Plc is currently generating about -0.01 per unit of volatility. If you would invest  636.00  in Metals Exploration Plc on October 25, 2024 and sell it today you would lose (36.00) from holding Metals Exploration Plc or give up 5.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capital Metals PLC  vs.  Metals Exploration Plc

Capital Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Metals PLC 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 basic 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.

Metals Exploration Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals Exploration Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital Metals and Metals Exploration

The main advantage of trading using opposite Capital Metals and Metals Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Metals position performs unexpectedly, Metals Exploration 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 Metals Exploration will offset losses from the drop in Metals Exploration's long position.

The idea behind Capital Metals PLC and Metals Exploration Plc 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.