Correlation Between Neometals and Capital Drilling

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

By analyzing existing cross correlation between Neometals and Capital Drilling, you can compare the effects of market volatilities on Neometals and Capital Drilling 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 Neometals with a short position of Capital Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neometals and Capital Drilling.

Diversification Opportunities for Neometals and Capital Drilling

0.7

Correlation Coefficient

Neometals  Capital Drilling

Poor diversification

The 3 months correlation between Neometals and Capital is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Neometals and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling and Neometals 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 Neometals are associated (or correlated) with Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Neometals i.e., Neometals and Capital Drilling go up and down completely randomly.

Pair Corralation between Neometals and Capital Drilling

Assuming the 90 days trading horizon Neometals is expected to generate 2.84 times more return on investment than Capital Drilling. However, Neometals is 2.84 times more volatile than Capital Drilling. It trades about 0.18 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.08 per unit of risk. If you would invest  275.00  in Neometals on December 2, 2024 and sell it today you would earn a total of  75.00  from holding Neometals or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	53.49%
Values	Daily Returns

Neometals  vs.  Capital Drilling

Neometals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Capital Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Drilling 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 Neometals and Capital Drilling

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

The idea behind Neometals and Capital Drilling 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.