Correlation Between Metal Sky and Alpha One

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

By analyzing existing cross correlation between Metal Sky Star and Alpha One, you can compare the effects of market volatilities on Metal Sky and Alpha One 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 Metal Sky with a short position of Alpha One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metal Sky and Alpha One.

Diversification Opportunities for Metal Sky and Alpha One

-0.24

Correlation Coefficient

Metal Sky  Alpha One

Very good diversification

The 3 months correlation between Metal and Alpha is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star and Alpha One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha One and Metal Sky 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 Metal Sky Star are associated (or correlated) with Alpha One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha One has no effect on the direction of Metal Sky i.e., Metal Sky and Alpha One go up and down completely randomly.

Pair Corralation between Metal Sky and Alpha One

If you would invest  5.01  in Metal Sky Star on December 28, 2024 and sell it today you would earn a total of  3.78  from holding Metal Sky Star or generate 75.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.68%
Values	Daily Returns

Metal Sky Star  vs.  Alpha One

Metal Sky Star

Risk-Adjusted Performance

Solid

Over the last 90 days Metal Sky Star has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively abnormal basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Alpha One

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha One has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Alpha One is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Metal Sky and Alpha One

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

The idea behind Metal Sky Star and Alpha One 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.