Correlation Between Metals X and NGEx Minerals

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

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

Diversification Opportunities for Metals X and NGEx Minerals

0.14

Correlation Coefficient

Metals X  NGEx Minerals

Average diversification

The 3 months correlation between Metals and NGEx is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Metals X Limited and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals and Metals X 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 Metals X Limited are associated (or correlated) with NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of Metals X i.e., Metals X and NGEx Minerals go up and down completely randomly.

Pair Corralation between Metals X and NGEx Minerals

Assuming the 90 days horizon Metals X Limited is expected to generate 2.92 times more return on investment than NGEx Minerals. However, Metals X is 2.92 times more volatile than NGEx Minerals. It trades about 0.17 of its potential returns per unit of risk. NGEx Minerals is currently generating about 0.03 per unit of risk. If you would invest  23.00  in Metals X Limited on December 19, 2024 and sell it today you would earn a total of  18.00  from holding Metals X Limited or generate 78.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Metals X Limited  vs.  NGEx Minerals

Metals X Limited

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Metals X reported solid returns over the last few months and may actually be approaching a breakup point.

NGEx Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NGEx Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Metals X and NGEx Minerals

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

The idea behind Metals X Limited and NGEx Minerals 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.