Correlation Between Leading Edge and Grid Metals

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

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

Diversification Opportunities for Leading Edge and Grid Metals

0.1

Correlation Coefficient

Leading Edge  Grid Metals

Average diversification

The 3 months correlation between Leading and Grid is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Leading Edge i.e., Leading Edge and Grid Metals go up and down completely randomly.

Pair Corralation between Leading Edge and Grid Metals

Assuming the 90 days horizon Leading Edge Materials is expected to generate 0.93 times more return on investment than Grid Metals. However, Leading Edge Materials is 1.07 times less risky than Grid Metals. It trades about 0.01 of its potential returns per unit of risk. Grid Metals Corp is currently generating about -0.03 per unit of risk. If you would invest  8.60  in Leading Edge Materials on September 12, 2024 and sell it today you would lose (1.65) from holding Leading Edge Materials or give up 19.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Leading Edge Materials  vs.  Grid Metals Corp

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Grid Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Leading Edge and Grid Metals

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

The idea behind Leading Edge Materials and Grid Metals Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.