Correlation Between Giga Metals and Murchison Minerals

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

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

Diversification Opportunities for Giga Metals and Murchison Minerals

0.61

Correlation Coefficient

Giga Metals  Murchison Minerals

Poor diversification

The 3 months correlation between Giga and Murchison is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Giga Metals and Murchison Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murchison Minerals and Giga 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 Giga Metals are associated (or correlated) with Murchison Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murchison Minerals has no effect on the direction of Giga Metals i.e., Giga Metals and Murchison Minerals go up and down completely randomly.

Pair Corralation between Giga Metals and Murchison Minerals

If you would invest  0.86  in Murchison Minerals on October 20, 2024 and sell it today you would lose (0.11) from holding Murchison Minerals or give up 12.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Giga Metals  vs.  Murchison Minerals

Giga Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Giga Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Giga Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Murchison Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Murchison Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Giga Metals and Murchison Minerals

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

The idea behind Giga Metals and Murchison 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.