Correlation Between NEXA RESOURCES and Adriatic Metals

Can any of the company-specific risk be diversified away by investing in both NEXA RESOURCES and Adriatic 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 NEXA RESOURCES and Adriatic Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NEXA RESOURCES SA and Adriatic Metals Plc, you can compare the effects of market volatilities on NEXA RESOURCES and Adriatic 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 NEXA RESOURCES with a short position of Adriatic Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEXA RESOURCES and Adriatic Metals.

Diversification Opportunities for NEXA RESOURCES and Adriatic Metals

0.78

Correlation Coefficient

NEXA RESOURCES  Adriatic Metals

Poor diversification

The 3 months correlation between NEXA and Adriatic is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding NEXA RESOURCES SA and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc and NEXA RESOURCES 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 NEXA RESOURCES SA are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of NEXA RESOURCES i.e., NEXA RESOURCES and Adriatic Metals go up and down completely randomly.

Pair Corralation between NEXA RESOURCES and Adriatic Metals

Assuming the 90 days horizon NEXA RESOURCES SA is expected to generate 1.05 times more return on investment than Adriatic Metals. However, NEXA RESOURCES is 1.05 times more volatile than Adriatic Metals Plc. It trades about 0.15 of its potential returns per unit of risk. Adriatic Metals Plc is currently generating about -0.1 per unit of risk. If you would invest  710.00  in NEXA RESOURCES SA on September 23, 2024 and sell it today you would earn a total of  55.00  from holding NEXA RESOURCES SA or generate 7.75% return on investment over 90 days.

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

NEXA RESOURCES SA  vs.  Adriatic Metals Plc

NEXA RESOURCES SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEXA RESOURCES SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NEXA RESOURCES reported solid returns over the last few months and may actually be approaching a breakup point.

Adriatic Metals Plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Adriatic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NEXA RESOURCES and Adriatic Metals

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

The idea behind NEXA RESOURCES SA and Adriatic 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.