Correlation Between Steppe Gold and Heliostar Metals

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

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

Diversification Opportunities for Steppe Gold and Heliostar Metals

0.84

Correlation Coefficient

Steppe Gold  Heliostar Metals

Very poor diversification

The 3 months correlation between Steppe and Heliostar is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Steppe Gold and Heliostar Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heliostar Metals and Steppe Gold 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 Steppe Gold are associated (or correlated) with Heliostar Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heliostar Metals has no effect on the direction of Steppe Gold i.e., Steppe Gold and Heliostar Metals go up and down completely randomly.

Pair Corralation between Steppe Gold and Heliostar Metals

Assuming the 90 days horizon Steppe Gold is expected to generate 2.93 times less return on investment than Heliostar Metals. But when comparing it to its historical volatility, Steppe Gold is 1.22 times less risky than Heliostar Metals. It trades about 0.09 of its potential returns per unit of risk. Heliostar Metals is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Heliostar Metals on December 30, 2024 and sell it today you would earn a total of  32.00  from holding Heliostar Metals or generate 80.0% return on investment over 90 days.

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

Steppe Gold  vs.  Heliostar Metals

Steppe Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Steppe Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Steppe Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Heliostar Metals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Heliostar Metals are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heliostar Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Steppe Gold and Heliostar Metals

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

The idea behind Steppe Gold and Heliostar 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.