Correlation Between Empire Metals and Palamina Corp

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

By analyzing existing cross correlation between Empire Metals Corp and Palamina Corp, you can compare the effects of market volatilities on Empire Metals and Palamina Corp 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 Palamina Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Palamina Corp.

Diversification Opportunities for Empire Metals and Palamina Corp

0.45

Correlation Coefficient

Empire Metals  Palamina Corp

Very weak diversification

The 3 months correlation between Empire and Palamina is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Corp and Palamina Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palamina Corp 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 Corp are associated (or correlated) with Palamina Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palamina Corp has no effect on the direction of Empire Metals i.e., Empire Metals and Palamina Corp go up and down completely randomly.

Pair Corralation between Empire Metals and Palamina Corp

Given the investment horizon of 90 days Empire Metals Corp is expected to under-perform the Palamina Corp. But the stock apears to be less risky and, when comparing its historical volatility, Empire Metals Corp is 2.92 times less risky than Palamina Corp. The stock trades about -0.13 of its potential returns per unit of risk. The Palamina Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  9.50  in Palamina Corp on December 29, 2024 and sell it today you would lose (0.50) from holding Palamina Corp or give up 5.26% of portfolio value over 90 days.

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

Empire Metals Corp  vs.  Palamina Corp

Empire Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empire Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Palamina Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Palamina Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palamina Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Empire Metals and Palamina Corp

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

The idea behind Empire Metals Corp and Palamina Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.