Correlation Between Compania and Vortex Metals

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Can any of the company-specific risk be diversified away by investing in both Compania and Vortex 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 Compania and Vortex Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Minas and Vortex Metals, you can compare the effects of market volatilities on Compania and Vortex 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 Compania with a short position of Vortex Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Vortex Metals.

Diversification Opportunities for Compania and Vortex Metals

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Compania and Vortex is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Vortex Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vortex Metals and Compania 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 Compania de Minas are associated (or correlated) with Vortex Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vortex Metals has no effect on the direction of Compania i.e., Compania and Vortex Metals go up and down completely randomly.

Pair Corralation between Compania and Vortex Metals

Considering the 90-day investment horizon Compania is expected to generate 42.11 times less return on investment than Vortex Metals. But when comparing it to its historical volatility, Compania de Minas is 14.32 times less risky than Vortex Metals. It trades about 0.06 of its potential returns per unit of risk. Vortex Metals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4.90  in Vortex Metals on November 27, 2024 and sell it today you would earn a total of  2.30  from holding Vortex Metals or generate 46.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Compania de Minas  vs.  Vortex Metals

 Performance 
       Timeline  
Compania de Minas 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Compania may actually be approaching a critical reversion point that can send shares even higher in March 2025.
Vortex Metals 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Vortex Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Vortex Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Compania and Vortex Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compania and Vortex Metals

The main advantage of trading using opposite Compania and Vortex Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Vortex 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 Vortex Metals will offset losses from the drop in Vortex Metals' long position.
The idea behind Compania de Minas and Vortex Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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