Correlation Between Defense Metals and Glen Eagle

Can any of the company-specific risk be diversified away by investing in both Defense Metals and Glen Eagle 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 Glen Eagle 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 Glen Eagle Resources, you can compare the effects of market volatilities on Defense Metals and Glen Eagle 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 Glen Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Defense Metals and Glen Eagle.

Diversification Opportunities for Defense Metals and Glen Eagle

0.11

Correlation Coefficient

Defense Metals  Glen Eagle

Average diversification

The 3 months correlation between Defense and Glen is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Defense Metals Corp and Glen Eagle Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glen Eagle Resources 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 Glen Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glen Eagle Resources has no effect on the direction of Defense Metals i.e., Defense Metals and Glen Eagle go up and down completely randomly.

Pair Corralation between Defense Metals and Glen Eagle

Assuming the 90 days horizon Defense Metals Corp is expected to generate 0.65 times more return on investment than Glen Eagle. However, Defense Metals Corp is 1.53 times less risky than Glen Eagle. It trades about 0.03 of its potential returns per unit of risk. Glen Eagle Resources is currently generating about -0.13 per unit of risk. If you would invest  11.00  in Defense Metals Corp on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Defense Metals Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Defense Metals Corp  vs.  Glen Eagle Resources

Defense Metals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Defense Metals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Defense Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Glen Eagle Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glen Eagle Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Defense Metals and Glen Eagle

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

The idea behind Defense Metals Corp and Glen Eagle Resources 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.