Correlation Between T2 Metals and South Pacific

Can any of the company-specific risk be diversified away by investing in both T2 Metals and South Pacific 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 T2 Metals and South Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T2 Metals Corp and South Pacific Metals, you can compare the effects of market volatilities on T2 Metals and South Pacific 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 T2 Metals with a short position of South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Metals and South Pacific.

Diversification Opportunities for T2 Metals and South Pacific

0.77

Correlation Coefficient

T2 Metals  South Pacific

Poor diversification

The 3 months correlation between TWO and South is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding T2 Metals Corp and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals and T2 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 T2 Metals Corp are associated (or correlated) with South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of T2 Metals i.e., T2 Metals and South Pacific go up and down completely randomly.

Pair Corralation between T2 Metals and South Pacific

Assuming the 90 days horizon T2 Metals Corp is expected to under-perform the South Pacific. But the stock apears to be less risky and, when comparing its historical volatility, T2 Metals Corp is 2.63 times less risky than South Pacific. The stock trades about -0.32 of its potential returns per unit of risk. The South Pacific Metals is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  45.00  in South Pacific Metals on October 27, 2024 and sell it today you would earn a total of  6.00  from holding South Pacific Metals or generate 13.33% return on investment over 90 days.

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

T2 Metals Corp  vs.  South Pacific Metals

T2 Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T2 Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

South Pacific Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days South Pacific Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's primary indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with T2 Metals and South Pacific

The main advantage of trading using opposite T2 Metals and South Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Metals position performs unexpectedly, South Pacific 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 South Pacific will offset losses from the drop in South Pacific's long position.

The idea behind T2 Metals Corp and South Pacific 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.