Correlation Between Seven West and Catalyst Metals

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

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

Diversification Opportunities for Seven West and Catalyst Metals

0.07

Correlation Coefficient

Seven West  Catalyst Metals

Significant diversification

The 3 months correlation between Seven and Catalyst is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media and Catalyst Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Metals and Seven West 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 West Media are associated (or correlated) with Catalyst Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Metals has no effect on the direction of Seven West i.e., Seven West and Catalyst Metals go up and down completely randomly.

Pair Corralation between Seven West and Catalyst Metals

Assuming the 90 days trading horizon Seven West Media is expected to under-perform the Catalyst Metals. But the stock apears to be less risky and, when comparing its historical volatility, Seven West Media is 1.42 times less risky than Catalyst Metals. The stock trades about -0.13 of its potential returns per unit of risk. The Catalyst Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  274.00  in Catalyst Metals on September 17, 2024 and sell it today you would lose (8.00) from holding Catalyst Metals or give up 2.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Seven West Media  vs.  Catalyst Metals

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Catalyst Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Catalyst Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Catalyst Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Seven West and Catalyst Metals

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

The idea behind Seven West Media and Catalyst 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.