Correlation Between RLF AgTech and Aurelia Metals

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

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

Diversification Opportunities for RLF AgTech and Aurelia Metals

0.8

Correlation Coefficient

RLF AgTech  Aurelia Metals

Very poor diversification

The 3 months correlation between RLF and Aurelia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding RLF AgTech and Aurelia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and RLF AgTech 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 RLF AgTech are associated (or correlated) with Aurelia Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurelia Metals has no effect on the direction of RLF AgTech i.e., RLF AgTech and Aurelia Metals go up and down completely randomly.

Pair Corralation between RLF AgTech and Aurelia Metals

Assuming the 90 days trading horizon RLF AgTech is expected to generate 1.54 times more return on investment than Aurelia Metals. However, RLF AgTech is 1.54 times more volatile than Aurelia Metals. It trades about 0.22 of its potential returns per unit of risk. Aurelia Metals is currently generating about 0.16 per unit of risk. If you would invest  2.90  in RLF AgTech on December 29, 2024 and sell it today you would earn a total of  3.30  from holding RLF AgTech or generate 113.79% return on investment over 90 days.

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

RLF AgTech  vs.  Aurelia Metals

RLF AgTech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RLF AgTech are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, RLF AgTech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Aurelia Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Aurelia Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RLF AgTech and Aurelia Metals

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

The idea behind RLF AgTech and Aurelia Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.