Correlation Between Transition Metals and Grid Metals

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

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

Diversification Opportunities for Transition Metals and Grid Metals

0.14

Correlation Coefficient

Transition Metals  Grid Metals

Average diversification

The 3 months correlation between Transition and Grid is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Transition Metals Corp and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp and Transition 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 Transition Metals Corp are associated (or correlated) with Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Transition Metals i.e., Transition Metals and Grid Metals go up and down completely randomly.

Pair Corralation between Transition Metals and Grid Metals

Assuming the 90 days horizon Transition Metals is expected to generate 2.21 times less return on investment than Grid Metals. In addition to that, Transition Metals is 1.14 times more volatile than Grid Metals Corp. It trades about 0.02 of its total potential returns per unit of risk. Grid Metals Corp is currently generating about 0.04 per unit of volatility. If you would invest  4.00  in Grid Metals Corp on December 21, 2024 and sell it today you would earn a total of  0.00  from holding Grid Metals Corp or generate 0.0% return on investment over 90 days.

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

Transition Metals Corp  vs.  Grid Metals Corp

Transition Metals Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transition Metals Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Transition Metals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Grid Metals Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grid Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, Grid Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transition Metals and Grid Metals

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

The idea behind Transition Metals Corp and Grid Metals Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.