Correlation Between SEVEN GROUP and Adriatic Metals

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

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

Diversification Opportunities for SEVEN GROUP and Adriatic Metals

0.35

Correlation Coefficient

SEVEN GROUP  Adriatic Metals

Weak diversification

The 3 months correlation between SEVEN and Adriatic is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding SEVEN GROUP HOLDINGS and Adriatic Metals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals Plc and SEVEN GROUP 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 SEVEN GROUP HOLDINGS are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals Plc has no effect on the direction of SEVEN GROUP i.e., SEVEN GROUP and Adriatic Metals go up and down completely randomly.

Pair Corralation between SEVEN GROUP and Adriatic Metals

Assuming the 90 days trading horizon SEVEN GROUP HOLDINGS is expected to under-perform the Adriatic Metals. But the stock apears to be less risky and, when comparing its historical volatility, SEVEN GROUP HOLDINGS is 1.46 times less risky than Adriatic Metals. The stock trades about -0.28 of its potential returns per unit of risk. The Adriatic Metals Plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  407.00  in Adriatic Metals Plc on September 23, 2024 and sell it today you would lose (3.00) from holding Adriatic Metals Plc or give up 0.74% of portfolio value over 90 days.

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

SEVEN GROUP HOLDINGS  vs.  Adriatic Metals Plc

SEVEN GROUP HOLDINGS

Risk-Adjusted Performance

6 of 100

Modest

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

Adriatic Metals Plc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adriatic Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SEVEN GROUP and Adriatic Metals

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

The idea behind SEVEN GROUP HOLDINGS and Adriatic Metals 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.