Correlation Between Aura Minerals and Highland Copper

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

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

Diversification Opportunities for Aura Minerals and Highland Copper

-0.42

Correlation Coefficient

Aura Minerals  Highland Copper

Very good diversification

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

Pair Corralation between Aura Minerals and Highland Copper

Assuming the 90 days trading horizon Aura Minerals is expected to generate 1.14 times less return on investment than Highland Copper. But when comparing it to its historical volatility, Aura Minerals is 2.19 times less risky than Highland Copper. It trades about 0.06 of its potential returns per unit of risk. Highland Copper is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  7.50  in Highland Copper on October 13, 2024 and sell it today you would earn a total of  0.00  from holding Highland Copper or generate 0.0% return on investment over 90 days.

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

Aura Minerals  vs.  Highland Copper

Aura Minerals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Aura Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Aura Minerals and Highland Copper

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

The idea behind Aura Minerals and Highland Copper 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .