Correlation Between Globex Mining and Equity Metals

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

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

Diversification Opportunities for Globex Mining and Equity Metals

-0.24

Correlation Coefficient

Globex Mining  Equity Metals

Very good diversification

The 3 months correlation between Globex and Equity is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and Equity Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Metals Corp and Globex 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 Globex Mining Enterprises are associated (or correlated) with Equity Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Metals Corp has no effect on the direction of Globex Mining i.e., Globex Mining and Equity Metals go up and down completely randomly.

Pair Corralation between Globex Mining and Equity Metals

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 0.33 times more return on investment than Equity Metals. However, Globex Mining Enterprises is 3.05 times less risky than Equity Metals. It trades about 0.15 of its potential returns per unit of risk. Equity Metals Corp is currently generating about -0.03 per unit of risk. If you would invest  114.00  in Globex Mining Enterprises on October 9, 2024 and sell it today you would earn a total of  5.00  from holding Globex Mining Enterprises or generate 4.39% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Equity Metals Corp

Globex Mining Enterprises

Risk-Adjusted Performance

10 of 100

Good

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

Equity Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Globex Mining and Equity Metals

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

The idea behind Globex Mining Enterprises and Equity Metals 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..