Correlation Between Centaurus Metals and Alderan Resources

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

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

Diversification Opportunities for Centaurus Metals and Alderan Resources

0.7

Correlation Coefficient

Centaurus Metals  Alderan Resources

Poor diversification

The 3 months correlation between Centaurus and Alderan is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals and Alderan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alderan Resources and Centaurus 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 Centaurus Metals are associated (or correlated) with Alderan Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alderan Resources has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Alderan Resources go up and down completely randomly.

Pair Corralation between Centaurus Metals and Alderan Resources

Assuming the 90 days trading horizon Centaurus Metals is expected to under-perform the Alderan Resources. But the stock apears to be less risky and, when comparing its historical volatility, Centaurus Metals is 1.87 times less risky than Alderan Resources. The stock trades about -0.41 of its potential returns per unit of risk. The Alderan Resources is currently generating about -0.21 of returns per unit of risk over similar time horizon. If you would invest  2.80  in Alderan Resources on September 25, 2024 and sell it today you would lose (0.80) from holding Alderan Resources or give up 28.57% of portfolio value over 90 days.

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

Centaurus Metals  vs.  Alderan Resources

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaurus Metals 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 primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Alderan Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alderan Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Centaurus Metals and Alderan Resources

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

The idea behind Centaurus Metals and Alderan 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.