Correlation Between Alto Metals and CSL
Can any of the company-specific risk be diversified away by investing in both Alto Metals and CSL 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 Alto Metals and CSL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alto Metals and CSL, you can compare the effects of market volatilities on Alto Metals and CSL 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 Alto Metals with a short position of CSL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alto Metals and CSL.
Diversification Opportunities for Alto Metals and CSL
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alto and CSL is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Alto Metals and CSL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSL and Alto 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 Alto Metals are associated (or correlated) with CSL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSL has no effect on the direction of Alto Metals i.e., Alto Metals and CSL go up and down completely randomly.
Pair Corralation between Alto Metals and CSL
Assuming the 90 days trading horizon Alto Metals is expected to generate 7.75 times more return on investment than CSL. However, Alto Metals is 7.75 times more volatile than CSL. It trades about 0.1 of its potential returns per unit of risk. CSL is currently generating about -0.01 per unit of risk. If you would invest 4.10 in Alto Metals on August 24, 2024 and sell it today you would earn a total of 4.40 from holding Alto Metals or generate 107.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alto Metals vs. CSL
Performance |
| Timeline |
| Alto Metals |
| CSL |
Alto Metals and CSL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alto Metals and CSL
The main advantage of trading using opposite Alto Metals and CSL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alto Metals position performs unexpectedly, CSL 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 CSL will offset losses from the drop in CSL's long position.| Alto Metals vs. Evolution Mining | Alto Metals vs. Bluescope Steel | Alto Metals vs. Perseus Mining | Alto Metals vs. Champion Iron |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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