Correlation Between Scotch Creek and Aurelia Metals

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

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

Diversification Opportunities for Scotch Creek and Aurelia Metals

0.29

Correlation Coefficient

Scotch Creek  Aurelia Metals

Modest diversification

The 3 months correlation between Scotch and Aurelia is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Scotch Creek Ventures and Aurelia Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurelia Metals and Scotch Creek 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 Scotch Creek Ventures 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 Scotch Creek i.e., Scotch Creek and Aurelia Metals go up and down completely randomly.

Pair Corralation between Scotch Creek and Aurelia Metals

Assuming the 90 days horizon Scotch Creek Ventures is expected to generate 22.96 times more return on investment than Aurelia Metals. However, Scotch Creek is 22.96 times more volatile than Aurelia Metals Limited. It trades about 0.12 of its potential returns per unit of risk. Aurelia Metals Limited is currently generating about 0.12 per unit of risk. If you would invest  2.60  in Scotch Creek Ventures on December 30, 2024 and sell it today you would earn a total of  1.80  from holding Scotch Creek Ventures or generate 69.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Scotch Creek Ventures  vs.  Aurelia Metals Limited

Scotch Creek Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scotch Creek Ventures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Scotch Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Aurelia Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aurelia Metals Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurelia Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Scotch Creek and Aurelia Metals

The main advantage of trading using opposite Scotch Creek and Aurelia Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotch Creek 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 Scotch Creek Ventures and Aurelia Metals Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.