Correlation Between Iluka Resources and Adriatic Metals

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

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

Diversification Opportunities for Iluka Resources and Adriatic Metals

-0.38

Correlation Coefficient

Iluka Resources  Adriatic Metals

Very good diversification

The 3 months correlation between Iluka and Adriatic is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Iluka Resources Ltd and Adriatic Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals PLC and Iluka Resources 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 Iluka Resources Ltd are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals PLC has no effect on the direction of Iluka Resources i.e., Iluka Resources and Adriatic Metals go up and down completely randomly.

Pair Corralation between Iluka Resources and Adriatic Metals

Assuming the 90 days horizon Iluka Resources Ltd is expected to under-perform the Adriatic Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Iluka Resources Ltd is 1.19 times less risky than Adriatic Metals. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Adriatic Metals PLC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  232.00  in Adriatic Metals PLC on November 30, 2024 and sell it today you would earn a total of  47.00  from holding Adriatic Metals PLC or generate 20.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	84.37%
Values	Daily Returns

Iluka Resources Ltd  vs.  Adriatic Metals PLC

Iluka Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iluka Resources Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Adriatic Metals PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iluka Resources and Adriatic Metals

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

The idea behind Iluka Resources Ltd and Adriatic Metals PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.