Correlation Between ACDC Metals and Sky Metals
Can any of the company-specific risk be diversified away by investing in both ACDC Metals and Sky 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 ACDC Metals and Sky Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACDC Metals and Sky Metals, you can compare the effects of market volatilities on ACDC Metals and Sky 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 ACDC Metals with a short position of Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACDC Metals and Sky Metals.
Diversification Opportunities for ACDC Metals and Sky Metals
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ACDC and Sky is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ACDC Metals and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals and ACDC 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 ACDC Metals are associated (or correlated) with Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of ACDC Metals i.e., ACDC Metals and Sky Metals go up and down completely randomly.
Pair Corralation between ACDC Metals and Sky Metals
Assuming the 90 days trading horizon ACDC Metals is expected to under-perform the Sky Metals. But the stock apears to be less risky and, when comparing its historical volatility, ACDC Metals is 1.5 times less risky than Sky Metals. The stock trades about -0.33 of its potential returns per unit of risk. The Sky Metals is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 5.50 in Sky Metals on August 25, 2024 and sell it today you would lose (0.40) from holding Sky Metals or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ACDC Metals vs. Sky Metals
Performance |
| Timeline |
| ACDC Metals |
| Sky Metals |
ACDC Metals and Sky Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ACDC Metals and Sky Metals
The main advantage of trading using opposite ACDC Metals and Sky Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACDC Metals position performs unexpectedly, Sky 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 Sky Metals will offset losses from the drop in Sky Metals' long position.| ACDC Metals vs. Duxton Broadacre Farms | ACDC Metals vs. Skycity Entertainment Group | ACDC Metals vs. Gold Road Resources | ACDC Metals vs. Carlton Investments |
| Sky Metals vs. Northern Star Resources | Sky Metals vs. Evolution Mining | Sky Metals vs. Aneka Tambang Tbk | Sky Metals vs. De Grey Mining |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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