Correlation Between Metals Exploration and Capital Metals

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

Diversification Opportunities for Metals Exploration and Capital Metals

-0.02

Correlation Coefficient

Metals Exploration  Capital Metals

Good diversification

The 3 months correlation between Metals and Capital is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Metals Exploration Plc and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC 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 Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of Metals Exploration i.e., Metals Exploration and Capital Metals go up and down completely randomly.

Pair Corralation between Metals Exploration and Capital Metals

Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 0.74 times more return on investment than Capital Metals. However, Metals Exploration Plc is 1.35 times less risky than Capital Metals. It trades about -0.01 of its potential returns per unit of risk. Capital Metals PLC is currently generating about -0.06 per unit of risk. If you would invest  636.00  in Metals Exploration Plc on October 25, 2024 and sell it today you would lose (36.00) from holding Metals Exploration Plc or give up 5.66% 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.  Capital Metals 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Capital Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Metals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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 Capital Metals

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

The idea behind Metals Exploration Plc and Capital Metals 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.