Correlation Between Eastern Platinum and Alien Metals

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

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

Diversification Opportunities for Eastern Platinum and Alien Metals

0.27

Correlation Coefficient

Eastern Platinum  Alien Metals

Modest diversification

The 3 months correlation between Eastern and Alien is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Platinum Limited and Alien Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alien Metals and Eastern Platinum 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 Eastern Platinum Limited are associated (or correlated) with Alien Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alien Metals has no effect on the direction of Eastern Platinum i.e., Eastern Platinum and Alien Metals go up and down completely randomly.

Pair Corralation between Eastern Platinum and Alien Metals

Assuming the 90 days horizon Eastern Platinum Limited is expected to under-perform the Alien Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eastern Platinum Limited is 9.11 times less risky than Alien Metals. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Alien Metals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.11  in Alien Metals on October 10, 2024 and sell it today you would lose (0.09) from holding Alien Metals or give up 81.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Eastern Platinum Limited  vs.  Alien Metals

Eastern Platinum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alien Metals

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Eastern Platinum and Alien Metals

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

The idea behind Eastern Platinum Limited and Alien 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.