Correlation Between Metals Exploration and Central Asia

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

Diversification Opportunities for Metals Exploration and Central Asia

-0.27

Correlation Coefficient

Metals Exploration  Central Asia

Very good diversification

The 3 months correlation between Metals and Central is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Metals Exploration i.e., Metals Exploration and Central Asia go up and down completely randomly.

Pair Corralation between Metals Exploration and Central Asia

Assuming the 90 days trading horizon Metals Exploration Plc is expected to under-perform the Central Asia. In addition to that, Metals Exploration is 2.16 times more volatile than Central Asia Metals. It trades about -0.16 of its total potential returns per unit of risk. Central Asia Metals is currently generating about -0.32 per unit of volatility. If you would invest  17,680  in Central Asia Metals on August 31, 2024 and sell it today you would lose (1,460) from holding Central Asia Metals or give up 8.26% of portfolio value over 90 days.

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

Metals Exploration Plc  vs.  Central Asia Metals

Metals Exploration Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Metals Exploration may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Metals Exploration and Central Asia

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

The idea behind Metals Exploration Plc and Central Asia Metals 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.