Correlation Between Enduro Metals and Brixton Metals

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

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

Diversification Opportunities for Enduro Metals and Brixton Metals

0.87

Correlation Coefficient

Enduro Metals  Brixton Metals

Very poor diversification

The 3 months correlation between Enduro and Brixton is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Enduro Metals and Brixton Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brixton Metals and Enduro 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 Enduro Metals are associated (or correlated) with Brixton Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brixton Metals has no effect on the direction of Enduro Metals i.e., Enduro Metals and Brixton Metals go up and down completely randomly.

Pair Corralation between Enduro Metals and Brixton Metals

Assuming the 90 days horizon Enduro Metals is expected to generate 1.52 times more return on investment than Brixton Metals. However, Enduro Metals is 1.52 times more volatile than Brixton Metals. It trades about -0.07 of its potential returns per unit of risk. Brixton Metals is currently generating about -0.16 per unit of risk. If you would invest  16.00  in Enduro Metals on September 13, 2024 and sell it today you would lose (4.00) from holding Enduro Metals or give up 25.0% of portfolio value over 90 days.

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

Enduro Metals  vs.  Brixton Metals

Enduro Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enduro Metals 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 primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Brixton Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brixton Metals 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 basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Enduro Metals and Brixton Metals

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

The idea behind Enduro Metals and Brixton 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.