Correlation Between Strategic Metals and Aldebaran Resources

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

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

Diversification Opportunities for Strategic Metals and Aldebaran Resources

0.21

Correlation Coefficient

Strategic Metals  Aldebaran Resources

Modest diversification

The 3 months correlation between Strategic and Aldebaran is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Metals and Aldebaran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldebaran Resources and Strategic 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 Strategic Metals are associated (or correlated) with Aldebaran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldebaran Resources has no effect on the direction of Strategic Metals i.e., Strategic Metals and Aldebaran Resources go up and down completely randomly.

Pair Corralation between Strategic Metals and Aldebaran Resources

Assuming the 90 days horizon Strategic Metals is expected to generate 1.15 times more return on investment than Aldebaran Resources. However, Strategic Metals is 1.15 times more volatile than Aldebaran Resources. It trades about 0.07 of its potential returns per unit of risk. Aldebaran Resources is currently generating about -0.02 per unit of risk. If you would invest  11.00  in Strategic Metals on December 1, 2024 and sell it today you would earn a total of  2.00  from holding Strategic Metals or generate 18.18% return on investment over 90 days.

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

Strategic Metals  vs.  Aldebaran Resources

Strategic Metals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Metals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Aldebaran Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aldebaran Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Strategic Metals and Aldebaran Resources

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

The idea behind Strategic Metals and Aldebaran 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.

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.