Correlation Between Power Metal and Moonpig Group

Can any of the company-specific risk be diversified away by investing in both Power Metal and Moonpig Group 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 Moonpig Group 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 Moonpig Group PLC, you can compare the effects of market volatilities on Power Metal and Moonpig Group 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 Moonpig Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Moonpig Group.

Diversification Opportunities for Power Metal and Moonpig Group

0.64

Correlation Coefficient

Power Metal  Moonpig Group

Poor diversification

The 3 months correlation between Power and Moonpig is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources and Moonpig Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moonpig Group PLC 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 Moonpig Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moonpig Group PLC has no effect on the direction of Power Metal i.e., Power Metal and Moonpig Group go up and down completely randomly.

Pair Corralation between Power Metal and Moonpig Group

Assuming the 90 days trading horizon Power Metal Resources is expected to generate 1.57 times more return on investment than Moonpig Group. However, Power Metal is 1.57 times more volatile than Moonpig Group PLC. It trades about -0.01 of its potential returns per unit of risk. Moonpig Group PLC is currently generating about -0.04 per unit of risk. If you would invest  1,375  in Power Metal Resources on December 22, 2024 and sell it today you would lose (62.00) from holding Power Metal Resources or give up 4.51% of portfolio value over 90 days.

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

Power Metal Resources  vs.  Moonpig Group PLC

Power Metal Resources

Risk-Adjusted Performance

Very Weak

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

Moonpig Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Moonpig Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Moonpig Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Power Metal and Moonpig Group

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

The idea behind Power Metal Resources and Moonpig Group 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.