Correlation Between Critical Elements and Adventus Mining

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

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

Diversification Opportunities for Critical Elements and Adventus Mining

0.64

Correlation Coefficient

Critical Elements  Adventus Mining

Poor diversification

The 3 months correlation between Critical and Adventus is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and Adventus Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adventus Mining and Critical Elements 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 Critical Elements are associated (or correlated) with Adventus Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adventus Mining has no effect on the direction of Critical Elements i.e., Critical Elements and Adventus Mining go up and down completely randomly.

Pair Corralation between Critical Elements and Adventus Mining

Assuming the 90 days horizon Critical Elements is expected to under-perform the Adventus Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, Critical Elements is 1.02 times less risky than Adventus Mining. The otc stock trades about -0.02 of its potential returns per unit of risk. The Adventus Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Adventus Mining on October 7, 2024 and sell it today you would earn a total of  11.00  from holding Adventus Mining or generate 52.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	58.06%
Values	Daily Returns

Critical Elements  vs.  Adventus Mining

Critical Elements

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Critical Elements has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Adventus Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adventus Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adventus Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Critical Elements and Adventus Mining

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

The idea behind Critical Elements and Adventus Mining 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.