Correlation Between Avarone Metals and Western Magnesium
Can any of the company-specific risk be diversified away by investing in both Avarone Metals and Western Magnesium 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 Avarone Metals and Western Magnesium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avarone Metals and Western Magnesium, you can compare the effects of market volatilities on Avarone Metals and Western Magnesium 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 Avarone Metals with a short position of Western Magnesium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avarone Metals and Western Magnesium.
Diversification Opportunities for Avarone Metals and Western Magnesium
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Avarone and Western is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals and Western Magnesium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Magnesium and Avarone 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 Avarone Metals are associated (or correlated) with Western Magnesium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Magnesium has no effect on the direction of Avarone Metals i.e., Avarone Metals and Western Magnesium go up and down completely randomly.
Pair Corralation between Avarone Metals and Western Magnesium
Assuming the 90 days horizon Avarone Metals is expected to generate 0.79 times more return on investment than Western Magnesium. However, Avarone Metals is 1.26 times less risky than Western Magnesium. It trades about -0.06 of its potential returns per unit of risk. Western Magnesium is currently generating about -0.09 per unit of risk. If you would invest 2.02 in Avarone Metals on September 4, 2024 and sell it today you would lose (1.69) from holding Avarone Metals or give up 83.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.19% |
| Values | Daily Returns |
Avarone Metals vs. Western Magnesium
Performance |
| Timeline |
| Avarone Metals |
| Western Magnesium |
Avarone Metals and Western Magnesium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avarone Metals and Western Magnesium
The main advantage of trading using opposite Avarone Metals and Western Magnesium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avarone Metals position performs unexpectedly, Western Magnesium 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 Western Magnesium will offset losses from the drop in Western Magnesium's long position.| Avarone Metals vs. Aurelia Metals Limited | Avarone Metals vs. Adriatic Metals PLC | Avarone Metals vs. Progressive Planet Solutions | Avarone Metals vs. Almonty Industries |
| Western Magnesium vs. Qubec Nickel Corp | Western Magnesium vs. IGO Limited | Western Magnesium vs. Avarone Metals | Western Magnesium vs. Adriatic Metals PLC |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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