Correlation Between SPACE and Metal Sky

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

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

Diversification Opportunities for SPACE and Metal Sky

0.68

Correlation Coefficient

SPACE  Metal Sky

Poor diversification

The 3 months correlation between SPACE and Metal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPACE and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star and SPACE 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 SPACE are associated (or correlated) with Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of SPACE i.e., SPACE and Metal Sky go up and down completely randomly.

Pair Corralation between SPACE and Metal Sky

Assuming the 90 days horizon SPACE is expected to generate 0.41 times more return on investment than Metal Sky. However, SPACE is 2.45 times less risky than Metal Sky. It trades about 0.01 of its potential returns per unit of risk. Metal Sky Star is currently generating about -0.21 per unit of risk. If you would invest  50.00  in SPACE on October 9, 2024 and sell it today you would lose (1.00) from holding SPACE or give up 2.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.0%
Values	Daily Returns

SPACE  vs.  Metal Sky Star

SPACE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Metal Sky Star

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Metal Sky showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPACE and Metal Sky

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

The idea behind SPACE and Metal Sky Star 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.