Correlation Between Rover Metals and Steppe Gold

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

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

Diversification Opportunities for Rover Metals and Steppe Gold

-0.04

Correlation Coefficient

Rover Metals  Steppe Gold

Good diversification

The 3 months correlation between Rover and Steppe is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Rover Metals Corp and Steppe Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steppe Gold and Rover 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 Rover Metals Corp are associated (or correlated) with Steppe Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steppe Gold has no effect on the direction of Rover Metals i.e., Rover Metals and Steppe Gold go up and down completely randomly.

Pair Corralation between Rover Metals and Steppe Gold

Assuming the 90 days horizon Rover Metals Corp is expected to generate 10.72 times more return on investment than Steppe Gold. However, Rover Metals is 10.72 times more volatile than Steppe Gold. It trades about 0.11 of its potential returns per unit of risk. Steppe Gold is currently generating about -0.07 per unit of risk. If you would invest  1.10  in Rover Metals Corp on September 14, 2024 and sell it today you would lose (0.11) from holding Rover Metals Corp or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Rover Metals Corp  vs.  Steppe Gold

Rover Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rover Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Rover Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Steppe Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steppe Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Steppe Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rover Metals and Steppe Gold

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

The idea behind Rover Metals Corp and Steppe Gold 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.