Correlation Between Arafura Resources and Metals X
Can any of the company-specific risk be diversified away by investing in both Arafura Resources and Metals X 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 Arafura Resources and Metals X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arafura Resources and Metals X Limited, you can compare the effects of market volatilities on Arafura Resources and Metals X 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 Arafura Resources with a short position of Metals X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Metals X.
Diversification Opportunities for Arafura Resources and Metals X
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arafura and Metals is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited and Arafura Resources 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 Arafura Resources are associated (or correlated) with Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Arafura Resources i.e., Arafura Resources and Metals X go up and down completely randomly.
Pair Corralation between Arafura Resources and Metals X
Assuming the 90 days horizon Arafura Resources is expected to generate 2.6 times less return on investment than Metals X. In addition to that, Arafura Resources is 1.24 times more volatile than Metals X Limited. It trades about 0.01 of its total potential returns per unit of risk. Metals X Limited is currently generating about 0.04 per unit of volatility. If you would invest 19.00 in Metals X Limited on August 25, 2024 and sell it today you would earn a total of 8.00 from holding Metals X Limited or generate 42.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arafura Resources vs. Metals X Limited
Performance |
| Timeline |
| Arafura Resources |
| Metals X Limited |
Arafura Resources and Metals X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arafura Resources and Metals X
The main advantage of trading using opposite Arafura Resources and Metals X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arafura Resources position performs unexpectedly, Metals X 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 Metals X will offset losses from the drop in Metals X's long position.| Arafura Resources vs. Norra Metals Corp | Arafura Resources vs. ZincX Resources Corp | Arafura Resources vs. Nuinsco Resources Limited | Arafura Resources vs. South Star Battery |
| Metals X vs. Norra Metals Corp | Metals X vs. ZincX Resources Corp | Metals X vs. Nuinsco Resources Limited | Metals X vs. South Star Battery |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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