Correlation Between Dalaroo Metals and Australian Potash

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

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

Diversification Opportunities for Dalaroo Metals and Australian Potash

0.5

Correlation Coefficient

Dalaroo Metals  Australian Potash

Very weak diversification

The 3 months correlation between Dalaroo and Australian is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dalaroo Metals and Australian Potash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Potash and Dalaroo 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 Dalaroo Metals are associated (or correlated) with Australian Potash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Potash has no effect on the direction of Dalaroo Metals i.e., Dalaroo Metals and Australian Potash go up and down completely randomly.

Pair Corralation between Dalaroo Metals and Australian Potash

Assuming the 90 days trading horizon Dalaroo Metals is expected to generate 5.15 times less return on investment than Australian Potash. But when comparing it to its historical volatility, Dalaroo Metals is 2.52 times less risky than Australian Potash. It trades about 0.02 of its potential returns per unit of risk. Australian Potash is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.20  in Australian Potash on December 30, 2024 and sell it today you would lose (0.10) from holding Australian Potash or give up 8.33% of portfolio value over 90 days.

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

Dalaroo Metals  vs.  Australian Potash

Dalaroo Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dalaroo Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Dalaroo Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Australian Potash

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Potash are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Australian Potash unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dalaroo Metals and Australian Potash

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

The idea behind Dalaroo Metals and Australian Potash 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 Stocks Directory module to find actively traded stocks across global markets.