Correlation Between CORNISH METALS and MUTUIONLINE

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

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

Diversification Opportunities for CORNISH METALS and MUTUIONLINE

0.49

Correlation Coefficient

CORNISH METALS  MUTUIONLINE

Very weak diversification

The 3 months correlation between CORNISH and MUTUIONLINE is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CORNISH METALS INC and MUTUIONLINE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MUTUIONLINE and CORNISH 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 CORNISH METALS INC are associated (or correlated) with MUTUIONLINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MUTUIONLINE has no effect on the direction of CORNISH METALS i.e., CORNISH METALS and MUTUIONLINE go up and down completely randomly.

Pair Corralation between CORNISH METALS and MUTUIONLINE

Assuming the 90 days trading horizon CORNISH METALS INC is expected to generate 2.24 times more return on investment than MUTUIONLINE. However, CORNISH METALS is 2.24 times more volatile than MUTUIONLINE. It trades about -0.05 of its potential returns per unit of risk. MUTUIONLINE is currently generating about -0.11 per unit of risk. If you would invest  9.15  in CORNISH METALS INC on December 13, 2024 and sell it today you would lose (1.25) from holding CORNISH METALS INC or give up 13.66% of portfolio value over 90 days.

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

CORNISH METALS INC  vs.  MUTUIONLINE

CORNISH METALS INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CORNISH METALS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MUTUIONLINE

Risk-Adjusted Performance

Very Weak

Over the last 90 days MUTUIONLINE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CORNISH METALS and MUTUIONLINE

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

The idea behind CORNISH METALS INC and MUTUIONLINE 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 Transaction History module to view history of all your transactions and understand their impact on performance.