Correlation Between Computershare and Native Mineral

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

By analyzing existing cross correlation between Computershare and Native Mineral Resources, you can compare the effects of market volatilities on Computershare and Native Mineral 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 Computershare with a short position of Native Mineral. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computershare and Native Mineral.

Diversification Opportunities for Computershare and Native Mineral

0.73

Correlation Coefficient

Computershare  Native Mineral

Poor diversification

The 3 months correlation between Computershare and Native is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Computershare and Native Mineral Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Native Mineral Resources and Computershare 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 Computershare are associated (or correlated) with Native Mineral. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Native Mineral Resources has no effect on the direction of Computershare i.e., Computershare and Native Mineral go up and down completely randomly.

Pair Corralation between Computershare and Native Mineral

Assuming the 90 days trading horizon Computershare is expected to generate 3.62 times less return on investment than Native Mineral. But when comparing it to its historical volatility, Computershare is 2.97 times less risky than Native Mineral. It trades about 0.19 of its potential returns per unit of risk. Native Mineral Resources is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3.20  in Native Mineral Resources on December 1, 2024 and sell it today you would earn a total of  4.30  from holding Native Mineral Resources or generate 134.37% return on investment over 90 days.

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

Computershare  vs.  Native Mineral Resources

Computershare

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Computershare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Native Mineral Resources

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Native Mineral Resources are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Native Mineral unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computershare and Native Mineral

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

The idea behind Computershare and Native Mineral Resources 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.