Correlation Between Centaurus Metals and Grid Metals

Can any of the company-specific risk be diversified away by investing in both Centaurus Metals and Grid 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 Grid 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 Grid Metals Corp, you can compare the effects of market volatilities on Centaurus Metals and Grid 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 Grid Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centaurus Metals and Grid Metals.

Diversification Opportunities for Centaurus Metals and Grid Metals

0.37

Correlation Coefficient

Centaurus Metals  Grid Metals

Weak diversification

The 3 months correlation between Centaurus and Grid is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals Limited and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Grid Metals go up and down completely randomly.

Pair Corralation between Centaurus Metals and Grid Metals

Assuming the 90 days horizon Centaurus Metals Limited is expected to generate 1.15 times more return on investment than Grid Metals. However, Centaurus Metals is 1.15 times more volatile than Grid Metals Corp. It trades about 0.0 of its potential returns per unit of risk. Grid Metals Corp is currently generating about -0.04 per unit of risk. If you would invest  85.00  in Centaurus Metals Limited on September 4, 2024 and sell it today you would lose (57.00) from holding Centaurus Metals Limited or give up 67.06% of portfolio value over 90 days.

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

Centaurus Metals Limited  vs.  Grid Metals Corp

Centaurus Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centaurus Metals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Centaurus Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grid Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Centaurus Metals and Grid Metals

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

The idea behind Centaurus Metals Limited and Grid Metals Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.