Correlation Between Caravel Minerals and Aurelia Metals

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

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

Diversification Opportunities for Caravel Minerals and Aurelia Metals

-0.35

Correlation Coefficient

Caravel Minerals  Aurelia Metals

Very good diversification

The 3 months correlation between Caravel and Aurelia is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Caravel Minerals and Aurelia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and Caravel Minerals 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 Caravel Minerals are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Caravel Minerals i.e., Caravel Minerals and Aurelia Metals go up and down completely randomly.

Pair Corralation between Caravel Minerals and Aurelia Metals

Assuming the 90 days trading horizon Caravel Minerals is expected to under-perform the Aurelia Metals. But the stock apears to be less risky and, when comparing its historical volatility, Caravel Minerals is 1.76 times less risky than Aurelia Metals. The stock trades about -0.24 of its potential returns per unit of risk. The Aurelia Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Aurelia Metals on October 8, 2024 and sell it today you would earn a total of  1.00  from holding Aurelia Metals or generate 5.88% return on investment over 90 days.

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

Caravel Minerals  vs.  Aurelia Metals

Caravel Minerals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Aurelia Metals

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Aurelia Metals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Caravel Minerals and Aurelia Metals

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

The idea behind Caravel Minerals and Aurelia 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.