Correlation Between Safety Shot and Metal Sky

Can any of the company-specific risk be diversified away by investing in both Safety Shot and Metal Sky 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 Safety Shot and Metal Sky into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Safety Shot and Metal Sky Star, you can compare the effects of market volatilities on Safety Shot and Metal Sky 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 Safety Shot with a short position of Metal Sky. Check out your portfolio center. Please also check ongoing floating volatility patterns of Safety Shot and Metal Sky.

Diversification Opportunities for Safety Shot and Metal Sky

0.25

Correlation Coefficient

Safety Shot  Metal Sky

Modest diversification

The 3 months correlation between Safety and Metal is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Safety Shot and Metal Sky Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metal Sky Star and Safety Shot 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 Safety Shot are associated (or correlated) with Metal Sky. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metal Sky Star has no effect on the direction of Safety Shot i.e., Safety Shot and Metal Sky go up and down completely randomly.

Pair Corralation between Safety Shot and Metal Sky

Given the investment horizon of 90 days Safety Shot is expected to under-perform the Metal Sky. But the stock apears to be less risky and, when comparing its historical volatility, Safety Shot is 2.61 times less risky than Metal Sky. The stock trades about -0.45 of its potential returns per unit of risk. The Metal Sky Star is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  5.01  in Metal Sky Star on October 25, 2024 and sell it today you would earn a total of  1.50  from holding Metal Sky Star or generate 29.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	31.58%
Values	Daily Returns

Safety Shot  vs.  Metal Sky Star

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Metal Sky Star

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Metal Sky Star has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady basic indicators, Metal Sky reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safety Shot and Metal Sky

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

The idea behind Safety Shot and Metal Sky Star 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.