Correlation Between Metals Exploration and Aeorema Communications

Can any of the company-specific risk be diversified away by investing in both Metals Exploration and Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications Plc, you can compare the effects of market volatilities on Metals Exploration and Aeorema Communications 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 Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals Exploration and Aeorema Communications.

Diversification Opportunities for Metals Exploration and Aeorema Communications

-0.41

Correlation Coefficient

Metals Exploration  Aeorema Communications

Very good diversification

The 3 months correlation between Metals and Aeorema is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Metals Exploration i.e., Metals Exploration and Aeorema Communications go up and down completely randomly.

Pair Corralation between Metals Exploration and Aeorema Communications

Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.59 times more return on investment than Aeorema Communications. However, Metals Exploration is 1.59 times more volatile than Aeorema Communications Plc. It trades about 0.09 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.01 per unit of risk. If you would invest  133.00  in Metals Exploration Plc on September 26, 2024 and sell it today you would earn a total of  402.00  from holding Metals Exploration Plc or generate 302.26% return on investment over 90 days.

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

Metals Exploration Plc  vs.  Aeorema Communications Plc

Metals Exploration Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals Exploration Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aeorema Communications

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aeorema Communications Plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Aeorema Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metals Exploration and Aeorema Communications

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

The idea behind Metals Exploration Plc and Aeorema Communications Plc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.