Correlation Between Centaurus Metals and Latin Metals

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

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

Diversification Opportunities for Centaurus Metals and Latin Metals

-0.17

Correlation Coefficient

Centaurus Metals  Latin Metals

Good diversification

The 3 months correlation between Centaurus and Latin is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals Limited and Latin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latin 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 Limited are associated (or correlated) with Latin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latin Metals has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Latin Metals go up and down completely randomly.

Pair Corralation between Centaurus Metals and Latin Metals

Assuming the 90 days horizon Centaurus Metals is expected to generate 2.59 times less return on investment than Latin Metals. But when comparing it to its historical volatility, Centaurus Metals Limited is 1.66 times less risky than Latin Metals. It trades about 0.05 of its potential returns per unit of risk. Latin Metals is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Latin Metals on December 29, 2024 and sell it today you would earn a total of  1.50  from holding Latin Metals or generate 23.08% return on investment over 90 days.

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

Centaurus Metals Limited  vs.  Latin Metals

Centaurus Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Centaurus Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Latin Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Latin Metals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Latin Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centaurus Metals and Latin Metals

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

The idea behind Centaurus Metals Limited and Latin 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.