Correlation Between GlobalData PLC and Empire Metals

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

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

Diversification Opportunities for GlobalData PLC and Empire Metals

-0.68

Correlation Coefficient

GlobalData PLC  Empire Metals

Excellent diversification

The 3 months correlation between GlobalData and Empire is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding GlobalData PLC and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and GlobalData PLC 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 GlobalData PLC are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of GlobalData PLC i.e., GlobalData PLC and Empire Metals go up and down completely randomly.

Pair Corralation between GlobalData PLC and Empire Metals

Assuming the 90 days trading horizon GlobalData PLC is expected to under-perform the Empire Metals. But the stock apears to be less risky and, when comparing its historical volatility, GlobalData PLC is 1.67 times less risky than Empire Metals. The stock trades about -0.12 of its potential returns per unit of risk. The Empire Metals Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  660.00  in Empire Metals Limited on December 26, 2024 and sell it today you would earn a total of  480.00  from holding Empire Metals Limited or generate 72.73% return on investment over 90 days.

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

GlobalData PLC  vs.  Empire Metals Limited

GlobalData PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Empire Metals Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Empire Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GlobalData PLC and Empire Metals

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

The idea behind GlobalData PLC and Empire Metals Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.