Correlation Between Alien Metals and Ferrexpo PLC

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

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

Diversification Opportunities for Alien Metals and Ferrexpo PLC

0.71

Correlation Coefficient

Alien Metals  Ferrexpo PLC

Poor diversification

The 3 months correlation between Alien and Ferrexpo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Alien Metals and Ferrexpo PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrexpo PLC and Alien 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 Alien Metals are associated (or correlated) with Ferrexpo PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrexpo PLC has no effect on the direction of Alien Metals i.e., Alien Metals and Ferrexpo PLC go up and down completely randomly.

Pair Corralation between Alien Metals and Ferrexpo PLC

Assuming the 90 days trading horizon Alien Metals is expected to generate 0.48 times more return on investment than Ferrexpo PLC. However, Alien Metals is 2.1 times less risky than Ferrexpo PLC. It trades about -0.09 of its potential returns per unit of risk. Ferrexpo PLC is currently generating about -0.06 per unit of risk. If you would invest  8.25  in Alien Metals on December 23, 2024 and sell it today you would lose (1.75) from holding Alien Metals or give up 21.21% of portfolio value over 90 days.

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

Alien Metals  vs.  Ferrexpo PLC

Alien Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alien Metals 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ferrexpo PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferrexpo PLC 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alien Metals and Ferrexpo PLC

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

The idea behind Alien Metals and Ferrexpo 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.