Correlation Between Health and Metro Mining

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

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

Diversification Opportunities for Health and Metro Mining

0.0

Correlation Coefficient

Health  Metro Mining

Pay attention - limited upside

The 3 months correlation between Health and Metro is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Health and Plant and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining and Health 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 Health and Plant are associated (or correlated) with Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Health i.e., Health and Metro Mining go up and down completely randomly.

Pair Corralation between Health and Metro Mining

Assuming the 90 days trading horizon Health and Plant is expected to under-perform the Metro Mining. But the stock apears to be less risky and, when comparing its historical volatility, Health and Plant is 2.66 times less risky than Metro Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Metro Mining is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.70  in Metro Mining on October 3, 2024 and sell it today you would earn a total of  4.30  from holding Metro Mining or generate 252.94% return on investment over 90 days.

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

Health and Plant  vs.  Metro Mining

Health and Plant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health and Plant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Metro Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Mining are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Metro Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Health and Metro Mining

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

The idea behind Health and Plant and Metro Mining 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.