Correlation Between Mineral Res and Defense Metals

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

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

Diversification Opportunities for Mineral Res and Defense Metals

-0.4

Correlation Coefficient

Mineral Res  Defense Metals

Very good diversification

The 3 months correlation between Mineral and Defense is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Res and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals Corp and Mineral Res 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 Res are associated (or correlated) with Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of Mineral Res i.e., Mineral Res and Defense Metals go up and down completely randomly.

Pair Corralation between Mineral Res and Defense Metals

Assuming the 90 days horizon Mineral Res is expected to under-perform the Defense Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, Mineral Res is 1.68 times less risky than Defense Metals. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Defense Metals Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Defense Metals Corp on October 21, 2024 and sell it today you would lose (1.00) from holding Defense Metals Corp or give up 7.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Mineral Res  vs.  Defense Metals Corp

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Defense Metals Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Defense Metals Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Defense Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mineral Res and Defense Metals

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

The idea behind Mineral Res and Defense 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.