Correlation Between Palamina Corp and Empire Metals

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

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

Diversification Opportunities for Palamina Corp and Empire Metals

-0.42

Correlation Coefficient

Palamina Corp  Empire Metals

Very good diversification

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

Pair Corralation between Palamina Corp and Empire Metals

Given the investment horizon of 90 days Palamina Corp is expected to under-perform the Empire Metals. But the stock apears to be less risky and, when comparing its historical volatility, Palamina Corp is 3.66 times less risky than Empire Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Empire Metals Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Empire Metals Corp on September 3, 2024 and sell it today you would earn a total of  4.00  from holding Empire Metals Corp or generate 133.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Palamina Corp  vs.  Empire Metals Corp

Palamina Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palamina Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Palamina Corp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Empire Metals Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Empire Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palamina Corp and Empire Metals

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

The idea behind Palamina Corp and Empire Metals Corp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.