Correlation Between Empire Metals and CVR Energy

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

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

Diversification Opportunities for Empire Metals and CVR Energy

0.66

Correlation Coefficient

Empire Metals  CVR Energy

Poor diversification

The 3 months correlation between Empire and CVR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Empire 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 Empire Metals Limited are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Empire Metals i.e., Empire Metals and CVR Energy go up and down completely randomly.

Pair Corralation between Empire Metals and CVR Energy

Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 1.15 times more return on investment than CVR Energy. However, Empire Metals is 1.15 times more volatile than CVR Energy. It trades about 0.12 of its potential returns per unit of risk. CVR Energy is currently generating about 0.09 per unit of risk. If you would invest  665.00  in Empire Metals Limited on October 5, 2024 and sell it today you would earn a total of  45.00  from holding Empire Metals Limited or generate 6.77% return on investment over 90 days.

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

Empire Metals Limited  vs.  CVR Energy

Empire Metals Limited

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Empire Metals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Empire Metals and CVR Energy

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

The idea behind Empire Metals Limited and CVR Energy 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.