Correlation Between Polar Capital and Empire Metals

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

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

Diversification Opportunities for Polar Capital and Empire Metals

0.55

Correlation Coefficient

Polar Capital  Empire Metals

Very weak diversification

The 3 months correlation between Polar and Empire is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Technology and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Polar Capital 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 Polar Capital Technology 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 Limited has no effect on the direction of Polar Capital i.e., Polar Capital and Empire Metals go up and down completely randomly.

Pair Corralation between Polar Capital and Empire Metals

Assuming the 90 days trading horizon Polar Capital Technology is expected to under-perform the Empire Metals. But the stock apears to be less risky and, when comparing its historical volatility, Polar Capital Technology is 2.3 times less risky than Empire Metals. The stock trades about 0.0 of its potential returns per unit of risk. The Empire Metals Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  570.00  in Empire Metals Limited on December 2, 2024 and sell it today you would earn a total of  390.00  from holding Empire Metals Limited or generate 68.42% return on investment over 90 days.

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

Polar Capital Technology  vs.  Empire Metals Limited

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polar Capital Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Polar Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Empire Metals Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Empire Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polar Capital and Empire Metals

The main advantage of trading using opposite Polar Capital and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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 Polar Capital Technology and Empire 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 Stocks Directory module to find actively traded stocks across global markets.