Correlation Between Delta Electronics and Sovereign Metals

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

By analyzing existing cross correlation between Delta Electronics Public and Sovereign Metals Limited, you can compare the effects of market volatilities on Delta Electronics and Sovereign 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 Delta Electronics with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Electronics and Sovereign Metals.

Diversification Opportunities for Delta Electronics and Sovereign Metals

-0.46

Correlation Coefficient

Delta Electronics  Sovereign Metals

Very good diversification

The 3 months correlation between Delta and Sovereign is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Delta Electronics Public and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Delta Electronics 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 Delta Electronics Public are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Delta Electronics i.e., Delta Electronics and Sovereign Metals go up and down completely randomly.

Pair Corralation between Delta Electronics and Sovereign Metals

Assuming the 90 days trading horizon Delta Electronics Public is expected to under-perform the Sovereign Metals. In addition to that, Delta Electronics is 2.05 times more volatile than Sovereign Metals Limited. It trades about -0.22 of its total potential returns per unit of risk. Sovereign Metals Limited is currently generating about 0.18 per unit of volatility. If you would invest  44.00  in Sovereign Metals Limited on December 21, 2024 and sell it today you would earn a total of  13.00  from holding Sovereign Metals Limited or generate 29.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Delta Electronics Public  vs.  Sovereign Metals Limited

Delta Electronics Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Electronics Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sovereign Metals

Risk-Adjusted Performance

Good

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

Pair Trading with Delta Electronics and Sovereign Metals

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

The idea behind Delta Electronics Public and Sovereign Metals Limited 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 Transaction History module to view history of all your transactions and understand their impact on performance.