Correlation Between Generation Mining and Clean Air

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

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

Diversification Opportunities for Generation Mining and Clean Air

0.9

Correlation Coefficient

Generation Mining  Clean Air

Almost no diversification

The 3 months correlation between Generation and Clean is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Generation Mining and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals and Generation Mining 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 Generation Mining are associated (or correlated) with Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Generation Mining i.e., Generation Mining and Clean Air go up and down completely randomly.

Pair Corralation between Generation Mining and Clean Air

Assuming the 90 days trading horizon Generation Mining is expected to under-perform the Clean Air. But the stock apears to be less risky and, when comparing its historical volatility, Generation Mining is 1.01 times less risky than Clean Air. The stock trades about -0.04 of its potential returns per unit of risk. The Clean Air Metals is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Clean Air Metals on October 3, 2024 and sell it today you would lose (2.00) from holding Clean Air Metals or give up 26.67% of portfolio value over 90 days.

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

Generation Mining  vs.  Clean Air Metals

Generation Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Mining 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Clean Air Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Air Metals 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 February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Generation Mining and Clean Air

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

The idea behind Generation Mining and Clean Air 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..