Correlation Between Capital Metals and URU Metals

Can any of the company-specific risk be diversified away by investing in both Capital Metals and URU 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 Capital Metals and URU Metals 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 URU Metals, you can compare the effects of market volatilities on Capital Metals and URU 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 Capital Metals with a short position of URU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Metals and URU Metals.

Diversification Opportunities for Capital Metals and URU Metals

-0.68

Correlation Coefficient

Capital Metals  URU Metals

Excellent diversification

The 3 months correlation between Capital and URU is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital Metals PLC and URU Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on URU Metals 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 URU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of URU Metals has no effect on the direction of Capital Metals i.e., Capital Metals and URU Metals go up and down completely randomly.

Pair Corralation between Capital Metals and URU Metals

Assuming the 90 days trading horizon Capital Metals PLC is expected to generate 0.83 times more return on investment than URU Metals. However, Capital Metals PLC is 1.21 times less risky than URU Metals. It trades about 0.1 of its potential returns per unit of risk. URU Metals is currently generating about -0.12 per unit of risk. If you would invest  180.00  in Capital Metals PLC on December 21, 2024 and sell it today you would earn a total of  35.00  from holding Capital Metals PLC or generate 19.44% return on investment over 90 days.

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

Capital Metals PLC  vs.  URU Metals

Capital Metals PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

URU Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days URU Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Capital Metals and URU Metals

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

The idea behind Capital Metals PLC and URU 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.