Correlation Between Hammer Metals and Caravel Minerals

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

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

Diversification Opportunities for Hammer Metals and Caravel Minerals

-0.78

Correlation Coefficient

Hammer Metals  Caravel Minerals

Pay attention - limited upside

The 3 months correlation between Hammer and Caravel is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hammer Metals and Caravel Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caravel Minerals and Hammer 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 Hammer Metals are associated (or correlated) with Caravel Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caravel Minerals has no effect on the direction of Hammer Metals i.e., Hammer Metals and Caravel Minerals go up and down completely randomly.

Pair Corralation between Hammer Metals and Caravel Minerals

Assuming the 90 days trading horizon Hammer Metals is expected to under-perform the Caravel Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Hammer Metals is 1.04 times less risky than Caravel Minerals. The stock trades about -0.01 of its potential returns per unit of risk. The Caravel Minerals is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Caravel Minerals on October 23, 2024 and sell it today you would lose (7.00) from holding Caravel Minerals or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Hammer Metals  vs.  Caravel Minerals

Hammer Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammer Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Caravel Minerals

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Hammer Metals and Caravel Minerals

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

The idea behind Hammer Metals and Caravel Minerals 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 Global Correlations module to find global opportunities by holding instruments from different markets.