Correlation Between Metro Mining and Steamships Trading

Can any of the company-specific risk be diversified away by investing in both Metro Mining and Steamships Trading 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 Metro Mining and Steamships Trading into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metro Mining and Steamships Trading, you can compare the effects of market volatilities on Metro Mining and Steamships Trading 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 Metro Mining with a short position of Steamships Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Mining and Steamships Trading.

Diversification Opportunities for Metro Mining and Steamships Trading

-0.2

Correlation Coefficient

Metro Mining  Steamships Trading

Good diversification

The 3 months correlation between Metro and Steamships is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Metro Mining and Steamships Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steamships Trading and Metro Mining 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 Metro Mining are associated (or correlated) with Steamships Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steamships Trading has no effect on the direction of Metro Mining i.e., Metro Mining and Steamships Trading go up and down completely randomly.

Pair Corralation between Metro Mining and Steamships Trading

Assuming the 90 days trading horizon Metro Mining is expected to generate 13.05 times more return on investment than Steamships Trading. However, Metro Mining is 13.05 times more volatile than Steamships Trading. It trades about 0.01 of its potential returns per unit of risk. Steamships Trading is currently generating about 0.0 per unit of risk. If you would invest  5.50  in Metro Mining on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Metro Mining or generate 0.0% return on investment over 90 days.

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

Metro Mining  vs.  Steamships Trading

Metro Mining

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Mining are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Metro Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Steamships Trading

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Steamships Trading are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Steamships Trading is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Metro Mining and Steamships Trading

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

The idea behind Metro Mining and Steamships Trading 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.