Correlation Between De Grey and Leeuwin Metals

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

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

Diversification Opportunities for De Grey and Leeuwin Metals

0.45

Correlation Coefficient

De Grey  Leeuwin Metals

Very weak diversification

The 3 months correlation between DEG and Leeuwin is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin Metals and De Grey 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 De Grey Mining are associated (or correlated) with Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of De Grey i.e., De Grey and Leeuwin Metals go up and down completely randomly.

Pair Corralation between De Grey and Leeuwin Metals

Assuming the 90 days trading horizon De Grey is expected to generate 89.4 times less return on investment than Leeuwin Metals. But when comparing it to its historical volatility, De Grey Mining is 6.81 times less risky than Leeuwin Metals. It trades about 0.01 of its potential returns per unit of risk. Leeuwin Metals is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7.30  in Leeuwin Metals on December 2, 2024 and sell it today you would earn a total of  4.70  from holding Leeuwin Metals or generate 64.38% return on investment over 90 days.

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

De Grey Mining  vs.  Leeuwin Metals

De Grey Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days De Grey Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, De Grey is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Leeuwin Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Leeuwin Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Leeuwin Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with De Grey and Leeuwin Metals

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

The idea behind De Grey Mining and Leeuwin 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.