Correlation Between Catalyst Metals and Coles

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

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

Diversification Opportunities for Catalyst Metals and Coles

0.85

Correlation Coefficient

Catalyst Metals  Coles

Very poor diversification

The 3 months correlation between Catalyst and Coles is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Metals and Coles Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coles Group and Catalyst 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 Catalyst Metals are associated (or correlated) with Coles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coles Group has no effect on the direction of Catalyst Metals i.e., Catalyst Metals and Coles go up and down completely randomly.

Pair Corralation between Catalyst Metals and Coles

Assuming the 90 days trading horizon Catalyst Metals is expected to generate 4.86 times more return on investment than Coles. However, Catalyst Metals is 4.86 times more volatile than Coles Group. It trades about 0.22 of its potential returns per unit of risk. Coles Group is currently generating about 0.09 per unit of risk. If you would invest  272.00  in Catalyst Metals on December 4, 2024 and sell it today you would earn a total of  155.00  from holding Catalyst Metals or generate 56.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Catalyst Metals  vs.  Coles Group

Catalyst Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Coles Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coles Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Coles 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 Catalyst Metals and Coles

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

The idea behind Catalyst Metals and Coles Group 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.