Correlation Between Metals Exploration and Weir Group

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

Diversification Opportunities for Metals Exploration and Weir Group

-0.23

Correlation Coefficient

Metals Exploration  Weir Group

Very good diversification

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

Pair Corralation between Metals Exploration and Weir Group

Assuming the 90 days trading horizon Metals Exploration Plc is expected to under-perform the Weir Group. In addition to that, Metals Exploration is 2.45 times more volatile than Weir Group PLC. It trades about -0.03 of its total potential returns per unit of risk. Weir Group PLC is currently generating about 0.13 per unit of volatility. If you would invest  203,893  in Weir Group PLC on September 14, 2024 and sell it today you would earn a total of  23,307  from holding Weir Group PLC or generate 11.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Metals Exploration Plc  vs.  Weir Group 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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Weir Group PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Weir Group PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Weir Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Metals Exploration and Weir Group

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

The idea behind Metals Exploration Plc and Weir Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.