Correlation Between Azarga Metals and Pampa Metals

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

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

Diversification Opportunities for Azarga Metals and Pampa Metals

0.04

Correlation Coefficient

Azarga Metals  Pampa Metals

Significant diversification

The 3 months correlation between Azarga and Pampa is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Azarga Metals Corp and Pampa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Metals and Azarga 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 Azarga Metals Corp are associated (or correlated) with Pampa Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Metals has no effect on the direction of Azarga Metals i.e., Azarga Metals and Pampa Metals go up and down completely randomly.

Pair Corralation between Azarga Metals and Pampa Metals

Assuming the 90 days horizon Azarga Metals Corp is expected to generate 1.13 times more return on investment than Pampa Metals. However, Azarga Metals is 1.13 times more volatile than Pampa Metals. It trades about 0.05 of its potential returns per unit of risk. Pampa Metals is currently generating about 0.04 per unit of risk. If you would invest  1.50  in Azarga Metals Corp on November 19, 2024 and sell it today you would earn a total of  0.00  from holding Azarga Metals Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Azarga Metals Corp  vs.  Pampa Metals

Azarga Metals Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azarga Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Azarga Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pampa Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Pampa Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Azarga Metals and Pampa Metals

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

The idea behind Azarga Metals Corp and Pampa 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.