Correlation Between Auto Trader and Metals Exploration
Can any of the company-specific risk be diversified away by investing in both Auto Trader and Metals Exploration 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 Auto Trader and Metals Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Metals Exploration Plc, you can compare the effects of market volatilities on Auto Trader and Metals Exploration 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 Auto Trader with a short position of Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Metals Exploration.
Diversification Opportunities for Auto Trader and Metals Exploration
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Auto and Metals is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc and Auto Trader 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 Auto Trader Group are associated (or correlated) with Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of Auto Trader i.e., Auto Trader and Metals Exploration go up and down completely randomly.
Pair Corralation between Auto Trader and Metals Exploration
Assuming the 90 days trading horizon Auto Trader Group is expected to generate 0.73 times more return on investment than Metals Exploration. However, Auto Trader Group is 1.37 times less risky than Metals Exploration. It trades about -0.1 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about -0.12 per unit of risk. If you would invest 87,460 in Auto Trader Group on August 30, 2024 and sell it today you would lose (3,860) from holding Auto Trader Group or give up 4.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Metals Exploration Plc
Performance |
| Timeline |
| Auto Trader Group |
| Metals Exploration Plc |
Auto Trader and Metals Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Metals Exploration
The main advantage of trading using opposite Auto Trader and Metals Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader position performs unexpectedly, Metals Exploration 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 Exploration will offset losses from the drop in Metals Exploration's long position.| Auto Trader vs. Walmart | Auto Trader vs. BYD Co | Auto Trader vs. Volkswagen AG | Auto Trader vs. Volkswagen AG Non Vtg |
| Metals Exploration vs. Cornish Metals | Metals Exploration vs. Advanced Medical Solutions | Metals Exploration vs. LPKF Laser Electronics | Metals Exploration vs. Southern Copper Corp |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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