Correlation Between Mineral Resources and Grid Metals

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

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

Diversification Opportunities for Mineral Resources and Grid Metals

0.35

Correlation Coefficient

Mineral Resources  Grid Metals

Weak diversification

The 3 months correlation between Mineral and Grid is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Resources Limited 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 Mineral 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 Mineral Resources Limited 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 Mineral Resources i.e., Mineral Resources and Grid Metals go up and down completely randomly.

Pair Corralation between Mineral Resources and Grid Metals

Assuming the 90 days horizon Mineral Resources Limited is expected to generate 0.73 times more return on investment than Grid Metals. However, Mineral Resources Limited is 1.37 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  2,297  in Mineral Resources Limited on September 4, 2024 and sell it today you would lose (117.00) from holding Mineral Resources Limited or give up 5.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Mineral Resources Limited  vs.  Grid Metals Corp

Mineral Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mineral Resources Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mineral Resources 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

0 of 100

Very Weak

Over the last 90 days Grid Metals Corp 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Mineral Resources and Grid Metals

The main advantage of trading using opposite Mineral Resources and Grid Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mineral Resources 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 Mineral Resources Limited 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.