Correlation Between Metals Exploration and First

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

Diversification Opportunities for Metals Exploration and First

-0.41

Correlation Coefficient

Metals Exploration  First

Very good diversification

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

Pair Corralation between Metals Exploration and First

Assuming the 90 days trading horizon Metals Exploration Plc is expected to generate 1.1 times more return on investment than First. However, Metals Exploration is 1.1 times more volatile than First Class Metals. It trades about 0.08 of its potential returns per unit of risk. First Class Metals is currently generating about 0.02 per unit of risk. If you would invest  535.00  in Metals Exploration Plc on October 24, 2024 and sell it today you would earn a total of  25.00  from holding Metals Exploration Plc or generate 4.67% 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.  First Class Metals

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.

First Class Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Metals Exploration and First

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

The idea behind Metals Exploration Plc and First Class 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.