Correlation Between Empire Metals and International Consolidated

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

Diversification Opportunities for Empire Metals and International Consolidated

-0.42

Correlation Coefficient

Empire Metals  International Consolidated

Very good diversification

The 3 months correlation between Empire and International is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and International Consolidated Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Consolidated 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 International Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Consolidated has no effect on the direction of Empire Metals i.e., Empire Metals and International Consolidated go up and down completely randomly.

Pair Corralation between Empire Metals and International Consolidated

Assuming the 90 days trading horizon Empire Metals is expected to generate 1.03 times less return on investment than International Consolidated. In addition to that, Empire Metals is 3.29 times more volatile than International Consolidated Airlines. It trades about 0.18 of its total potential returns per unit of risk. International Consolidated Airlines is currently generating about 0.6 per unit of volatility. If you would invest  26,060  in International Consolidated Airlines on September 29, 2024 and sell it today you would earn a total of  4,150  from holding International Consolidated Airlines or generate 15.92% return on investment over 90 days.

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

Empire Metals Limited  vs.  International Consolidated Air

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

International Consolidated

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, International Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empire Metals and International Consolidated

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

The idea behind Empire Metals Limited and International Consolidated Airlines 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.