Correlation Between Power Metals and GéoMégA Resources

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

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

Diversification Opportunities for Power Metals and GéoMégA Resources

-0.13

Correlation Coefficient

Power Metals  GéoMégA Resources

Good diversification

The 3 months correlation between Power and GéoMégA is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Power Metals Corp and GoMgA Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GéoMégA Resources and Power 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 Power Metals Corp are associated (or correlated) with GéoMégA Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GéoMégA Resources has no effect on the direction of Power Metals i.e., Power Metals and GéoMégA Resources go up and down completely randomly.

Pair Corralation between Power Metals and GéoMégA Resources

Assuming the 90 days horizon Power Metals Corp is expected to generate 1.31 times more return on investment than GéoMégA Resources. However, Power Metals is 1.31 times more volatile than GoMgA Resources. It trades about 0.28 of its potential returns per unit of risk. GoMgA Resources is currently generating about 0.04 per unit of risk. If you would invest  32.00  in Power Metals Corp on December 19, 2024 and sell it today you would earn a total of  64.00  from holding Power Metals Corp or generate 200.0% return on investment over 90 days.

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

Power Metals Corp  vs.  GoMgA Resources

Power Metals Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Power Metals Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Power Metals reported solid returns over the last few months and may actually be approaching a breakup point.

GéoMégA Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GoMgA Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GéoMégA Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Metals and GéoMégA Resources

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

The idea behind Power Metals Corp and GoMgA Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.