Correlation Between Trellus Health and Future Metals

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

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

Diversification Opportunities for Trellus Health and Future Metals

-0.37

Correlation Coefficient

Trellus Health  Future Metals

Very good diversification

The 3 months correlation between Trellus and Future is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Trellus Health plc and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL and Trellus Health 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 Trellus Health plc are associated (or correlated) with Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Trellus Health i.e., Trellus Health and Future Metals go up and down completely randomly.

Pair Corralation between Trellus Health and Future Metals

Assuming the 90 days trading horizon Trellus Health plc is expected to generate 33.04 times more return on investment than Future Metals. However, Trellus Health is 33.04 times more volatile than Future Metals NL. It trades about 0.11 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.35 per unit of risk. If you would invest  68.00  in Trellus Health plc on October 26, 2024 and sell it today you would earn a total of  152.00  from holding Trellus Health plc or generate 223.53% return on investment over 90 days.

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

Trellus Health plc  vs.  Future Metals NL

Trellus Health plc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trellus Health plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trellus Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Trellus Health and Future Metals

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

The idea behind Trellus Health plc and Future Metals NL 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.