Correlation Between Defense Metals and CAT Strategic

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

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

Diversification Opportunities for Defense Metals and CAT Strategic

-0.07

Correlation Coefficient

Defense Metals  CAT Strategic

Good diversification

The 3 months correlation between Defense and CAT is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Defense Metals Corp and CAT Strategic Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAT Strategic Metals and Defense 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 Defense Metals Corp are associated (or correlated) with CAT Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAT Strategic Metals has no effect on the direction of Defense Metals i.e., Defense Metals and CAT Strategic go up and down completely randomly.

Pair Corralation between Defense Metals and CAT Strategic

Assuming the 90 days horizon Defense Metals Corp is expected to under-perform the CAT Strategic. But the otc stock apears to be less risky and, when comparing its historical volatility, Defense Metals Corp is 19.52 times less risky than CAT Strategic. The otc stock trades about -0.03 of its potential returns per unit of risk. The CAT Strategic Metals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.01  in CAT Strategic Metals on December 28, 2024 and sell it today you would earn a total of  0.14  from holding CAT Strategic Metals or generate 1400.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Defense Metals Corp  vs.  CAT Strategic Metals

Defense Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Defense Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CAT Strategic Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAT Strategic Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAT Strategic reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defense Metals and CAT Strategic

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

The idea behind Defense Metals Corp and CAT Strategic 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.