Correlation Between Sovereign Metals and Antofagasta PLC

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

By analyzing existing cross correlation between Sovereign Metals and Antofagasta PLC, you can compare the effects of market volatilities on Sovereign Metals and Antofagasta PLC 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 Antofagasta PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sovereign Metals and Antofagasta PLC.

Diversification Opportunities for Sovereign Metals and Antofagasta PLC

-0.31

Correlation Coefficient

Sovereign Metals  Antofagasta PLC

Very good diversification

The 3 months correlation between Sovereign and Antofagasta is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Sovereign Metals and Antofagasta PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta PLC 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 Antofagasta PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta PLC has no effect on the direction of Sovereign Metals i.e., Sovereign Metals and Antofagasta PLC go up and down completely randomly.

Pair Corralation between Sovereign Metals and Antofagasta PLC

Assuming the 90 days trading horizon Sovereign Metals is expected to generate 1.05 times more return on investment than Antofagasta PLC. However, Sovereign Metals is 1.05 times more volatile than Antofagasta PLC. It trades about 0.2 of its potential returns per unit of risk. Antofagasta PLC is currently generating about 0.02 per unit of risk. If you would invest  2,950  in Sovereign Metals on September 12, 2024 and sell it today you would earn a total of  1,000.00  from holding Sovereign Metals or generate 33.9% return on investment over 90 days.

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

Sovereign Metals  vs.  Antofagasta PLC

Sovereign Metals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sovereign Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Antofagasta PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Antofagasta PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Antofagasta PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sovereign Metals and Antofagasta PLC

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

The idea behind Sovereign Metals and Antofagasta PLC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.