Correlation Between Merdeka Copper and Lion Metal

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

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

Diversification Opportunities for Merdeka Copper and Lion Metal

-0.01

Correlation Coefficient

Merdeka Copper  Lion Metal

Good diversification

The 3 months correlation between Merdeka and Lion is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Merdeka Copper Gold and Lion Metal Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion Metal Works and Merdeka Copper 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 Merdeka Copper Gold are associated (or correlated) with Lion Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion Metal Works has no effect on the direction of Merdeka Copper i.e., Merdeka Copper and Lion Metal go up and down completely randomly.

Pair Corralation between Merdeka Copper and Lion Metal

Assuming the 90 days trading horizon Merdeka Copper Gold is expected to under-perform the Lion Metal. But the stock apears to be less risky and, when comparing its historical volatility, Merdeka Copper Gold is 2.45 times less risky than Lion Metal. The stock trades about -0.02 of its potential returns per unit of risk. The Lion Metal Works is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  40,000  in Lion Metal Works on December 30, 2024 and sell it today you would lose (800.00) from holding Lion Metal Works or give up 2.0% of portfolio value over 90 days.

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

Merdeka Copper Gold  vs.  Lion Metal Works

Merdeka Copper Gold

Risk-Adjusted Performance

Very Weak

Over the last 90 days Merdeka Copper Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Merdeka Copper is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Lion Metal Works

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lion Metal Works are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Lion Metal disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Merdeka Copper and Lion Metal

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

The idea behind Merdeka Copper Gold and Lion Metal Works 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.