Correlation Between Sovereign Metals and Gaztransport

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

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

Diversification Opportunities for Sovereign Metals and Gaztransport

0.68

Correlation Coefficient

Sovereign Metals  Gaztransport

Poor diversification

The 3 months correlation between Sovereign and Gaztransport is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and Gaztransport et Technigaz in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gaztransport et Technigaz and Sovereign 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 Sovereign Metals are associated (or correlated) with Gaztransport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gaztransport et Technigaz has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Gaztransport go up and down completely randomly.

Pair Corralation between Sovereign Metals and Gaztransport

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.69 times more return on investment than Gaztransport. However, Sovereign Metals is 1.69 times more volatile than Gaztransport et Technigaz. It trades about 0.1 of its potential returns per unit of risk. Gaztransport et Technigaz is currently generating about 0.04 per unit of risk. If you would invest  2,300  in Sovereign Metals on September 4, 2024 and sell it today you would earn a total of  1,750  from holding Sovereign Metals or generate 76.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Sovereign Metals  vs.  Gaztransport et Technigaz

Sovereign Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gaztransport et Technigaz

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gaztransport et Technigaz are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gaztransport may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Sovereign Metals and Gaztransport

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

The idea behind Sovereign Metals and Gaztransport et Technigaz 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.