Correlation Between Contango ORE and East Africa

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

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

Diversification Opportunities for Contango ORE and East Africa

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Correlation Coefficient

Contango ORE  East Africa

Pay attention - limited upside

The 3 months correlation between Contango and East is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and Contango ORE 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 Contango ORE are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Contango ORE i.e., Contango ORE and East Africa go up and down completely randomly.

Pair Corralation between Contango ORE and East Africa

Given the investment horizon of 90 days Contango ORE is expected to under-perform the East Africa. But the stock apears to be less risky and, when comparing its historical volatility, Contango ORE is 10.86 times less risky than East Africa. The stock trades about -0.03 of its potential returns per unit of risk. The East Africa Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.10  in East Africa Metals on October 24, 2024 and sell it today you would earn a total of  9.90  from holding East Africa Metals or generate 900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.24%
Values	Daily Returns

Contango ORE  vs.  East Africa Metals

Contango ORE

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

East Africa Metals

Risk-Adjusted Performance

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Very Weak

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

Pair Trading with Contango ORE and East Africa

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

The idea behind Contango ORE and East Africa 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.