Correlation Between Metals Exploration and CVR Energy

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

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

Diversification Opportunities for Metals Exploration and CVR Energy

-0.23

Correlation Coefficient

Metals Exploration  CVR Energy

Very good diversification

The 3 months correlation between Metals and CVR is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Metals Exploration 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 Exploration Plc are associated (or correlated) with CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Metals Exploration i.e., Metals Exploration and CVR Energy go up and down completely randomly.

Pair Corralation between Metals Exploration and CVR Energy

Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.28 times more return on investment than CVR Energy. However, Metals Exploration is 1.28 times more volatile than CVR Energy. It trades about 0.08 of its potential returns per unit of risk. CVR Energy is currently generating about -0.02 per unit of risk. If you would invest  178.00  in Metals Exploration Plc on October 5, 2024 and sell it today you would earn a total of  382.00  from holding Metals Exploration Plc or generate 214.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.92%
Values	Daily Returns

Metals Exploration Plc  vs.  CVR Energy

Metals Exploration Plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Metals Exploration exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Metals Exploration and CVR Energy

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

The idea behind Metals Exploration Plc and CVR Energy 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.