Correlation Between Panther Metals and BAE Systems

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Can any of the company-specific risk be diversified away by investing in both Panther Metals and BAE Systems 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 Panther Metals and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Panther Metals PLC and BAE Systems plc, you can compare the effects of market volatilities on Panther Metals and BAE Systems 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 Panther Metals with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Panther Metals and BAE Systems.

Diversification Opportunities for Panther Metals and BAE Systems

0.46
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between Panther Metals and BAE Systems

Assuming the 90 days trading horizon Panther Metals PLC is expected to generate 60.41 times more return on investment than BAE Systems. However, Panther Metals is 60.41 times more volatile than BAE Systems plc. It trades about 0.07 of its potential returns per unit of risk. BAE Systems plc is currently generating about 0.06 per unit of risk. If you would invest  12,250  in Panther Metals PLC on October 7, 2024 and sell it today you would lose (3,000) from holding Panther Metals PLC or give up 24.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.2%
ValuesDaily Returns

Panther Metals PLC  vs.  BAE Systems plc

 Performance 
       Timeline  
Panther Metals PLC 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Panther Metals PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Panther Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.
BAE Systems plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BAE Systems plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Panther Metals and BAE Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Panther Metals and BAE Systems

The main advantage of trading using opposite Panther Metals and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Panther Metals position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.
The idea behind Panther Metals PLC and BAE Systems plc 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.
Check out your portfolio center.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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