Correlation Between Power Metal and Advanced Medical

Can any of the company-specific risk be diversified away by investing in both Power Metal and Advanced Medical 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 Power Metal and Advanced Medical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Metal Resources and Advanced Medical Solutions, you can compare the effects of market volatilities on Power Metal and Advanced Medical 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 Power Metal with a short position of Advanced Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Advanced Medical.

Diversification Opportunities for Power Metal and Advanced Medical

0.09

Correlation Coefficient

Power Metal  Advanced Medical

Significant diversification

The 3 months correlation between Power and Advanced is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources and Advanced Medical Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Medical Sol and Power Metal 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 Power Metal Resources are associated (or correlated) with Advanced Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Medical Sol has no effect on the direction of Power Metal i.e., Power Metal and Advanced Medical go up and down completely randomly.

Pair Corralation between Power Metal and Advanced Medical

Assuming the 90 days trading horizon Power Metal is expected to generate 3.03 times less return on investment than Advanced Medical. But when comparing it to its historical volatility, Power Metal Resources is 1.17 times less risky than Advanced Medical. It trades about 0.04 of its potential returns per unit of risk. Advanced Medical Solutions is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  19,700  in Advanced Medical Solutions on December 30, 2024 and sell it today you would earn a total of  4,000  from holding Advanced Medical Solutions or generate 20.3% return on investment over 90 days.

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

Power Metal Resources  vs.  Advanced Medical Solutions

Power Metal Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metal Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Power Metal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Advanced Medical Sol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Advanced Medical exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Metal and Advanced Medical

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

The idea behind Power Metal Resources and Advanced Medical Solutions 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.