Correlation Between Neometals and Power Metal

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

By analyzing existing cross correlation between Neometals and Power Metal Resources, you can compare the effects of market volatilities on Neometals and Power Metal 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 Power Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neometals and Power Metal.

Diversification Opportunities for Neometals and Power Metal

0.42

Correlation Coefficient

Neometals  Power Metal

Very weak diversification

The 3 months correlation between Neometals and Power is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Neometals and Power Metal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metal Resources 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 Power Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metal Resources has no effect on the direction of Neometals i.e., Neometals and Power Metal go up and down completely randomly.

Pair Corralation between Neometals and Power Metal

Assuming the 90 days trading horizon Neometals is expected to under-perform the Power Metal. In addition to that, Neometals is 2.91 times more volatile than Power Metal Resources. It trades about -0.05 of its total potential returns per unit of risk. Power Metal Resources is currently generating about -0.05 per unit of volatility. If you would invest  1,463  in Power Metal Resources on November 29, 2024 and sell it today you would lose (138.00) from holding Power Metal Resources or give up 9.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	72.13%
Values	Daily Returns

Neometals  vs.  Power Metal Resources

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Power Metal Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Metal Resources 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.

Pair Trading with Neometals and Power Metal

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

The idea behind Neometals and Power Metal Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.