Correlation Between Centaurus Metals and Lykos Metals

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

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

Diversification Opportunities for Centaurus Metals and Lykos Metals

0.87

Correlation Coefficient

Centaurus Metals  Lykos Metals

Very poor diversification

The 3 months correlation between Centaurus and Lykos is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals and Lykos Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lykos Metals 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 Lykos Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lykos Metals has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Lykos Metals go up and down completely randomly.

Pair Corralation between Centaurus Metals and Lykos Metals

Assuming the 90 days trading horizon Centaurus Metals is expected to under-perform the Lykos Metals. But the stock apears to be less risky and, when comparing its historical volatility, Centaurus Metals is 1.71 times less risky than Lykos Metals. The stock trades about -0.27 of its potential returns per unit of risk. The Lykos Metals is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Lykos Metals on October 10, 2024 and sell it today you would lose (0.30) from holding Lykos Metals or give up 23.08% of portfolio value over 90 days.

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

Centaurus Metals  vs.  Lykos Metals

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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lykos Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lykos 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 forward-looking signals remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Centaurus Metals and Lykos Metals

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

The idea behind Centaurus Metals and Lykos 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.