Correlation Between Emergent Metals and Radius Gold

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

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

Diversification Opportunities for Emergent Metals and Radius Gold

-0.21

Correlation Coefficient

Emergent Metals  Radius Gold

Very good diversification

The 3 months correlation between Emergent and Radius is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Metals Corp and Radius Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Radius Gold and Emergent 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 Emergent Metals Corp are associated (or correlated) with Radius Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Radius Gold has no effect on the direction of Emergent Metals i.e., Emergent Metals and Radius Gold go up and down completely randomly.

Pair Corralation between Emergent Metals and Radius Gold

Assuming the 90 days horizon Emergent Metals Corp is expected to generate 1.3 times more return on investment than Radius Gold. However, Emergent Metals is 1.3 times more volatile than Radius Gold. It trades about 0.13 of its potential returns per unit of risk. Radius Gold is currently generating about 0.02 per unit of risk. If you would invest  6.00  in Emergent Metals Corp on September 10, 2024 and sell it today you would earn a total of  4.00  from holding Emergent Metals Corp or generate 66.67% return on investment over 90 days.

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

Emergent Metals Corp  vs.  Radius Gold

Emergent Metals Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Emergent Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Radius Gold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Radius Gold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Radius Gold may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emergent Metals and Radius Gold

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

The idea behind Emergent Metals Corp and Radius Gold 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.