Correlation Between Grid Metals and Aurelia Metals

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

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

Diversification Opportunities for Grid Metals and Aurelia Metals

0.07

Correlation Coefficient

Grid Metals  Aurelia Metals

Significant diversification

The 3 months correlation between Grid and Aurelia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Grid Metals Corp and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and Grid Metals 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 Grid Metals Corp are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of Grid Metals i.e., Grid Metals and Aurelia Metals go up and down completely randomly.

Pair Corralation between Grid Metals and Aurelia Metals

Assuming the 90 days horizon Grid Metals is expected to generate 1.65 times less return on investment than Aurelia Metals. But when comparing it to its historical volatility, Grid Metals Corp is 1.03 times less risky than Aurelia Metals. It trades about 0.09 of its potential returns per unit of risk. Aurelia Metals Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  7.04  in Aurelia Metals Limited on December 2, 2024 and sell it today you would earn a total of  5.96  from holding Aurelia Metals Limited or generate 84.66% return on investment over 90 days.

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

Grid Metals Corp  vs.  Aurelia Metals Limited

Grid Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Grid Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grid Metals and Aurelia Metals

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

The idea behind Grid Metals Corp and Aurelia Metals Limited 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.