Correlation Between Central Asia and Sovereign Metals
Can any of the company-specific risk be diversified away by investing in both Central Asia and Sovereign 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 Central Asia and Sovereign Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Asia Metals and Sovereign Metals, you can compare the effects of market volatilities on Central Asia and Sovereign 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 Central Asia with a short position of Sovereign Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Sovereign Metals.
Diversification Opportunities for Central Asia and Sovereign Metals
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Central and Sovereign is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Sovereign Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals and Central Asia 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 Central Asia Metals are associated (or correlated) with Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of Central Asia i.e., Central Asia and Sovereign Metals go up and down completely randomly.
Pair Corralation between Central Asia and Sovereign Metals
Assuming the 90 days trading horizon Central Asia Metals is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, Central Asia Metals is 1.42 times less risky than Sovereign Metals. The stock trades about -0.07 of its potential returns per unit of risk. The Sovereign Metals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,350 in Sovereign Metals on September 3, 2024 and sell it today you would earn a total of 700.00 from holding Sovereign Metals or generate 20.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Asia Metals vs. Sovereign Metals
Performance |
| Timeline |
| Central Asia Metals |
| Sovereign Metals |
Central Asia and Sovereign Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Asia and Sovereign Metals
The main advantage of trading using opposite Central Asia and Sovereign Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia position performs unexpectedly, Sovereign 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 Sovereign Metals will offset losses from the drop in Sovereign Metals' long position.| Central Asia vs. The Investment | Central Asia vs. Erste Group Bank | Central Asia vs. Alior Bank SA | Central Asia vs. Herald Investment Trust |
| Sovereign Metals vs. Games Workshop Group | Sovereign Metals vs. Telecom Italia SpA | Sovereign Metals vs. Zegona Communications Plc | Sovereign Metals vs. Molson Coors Beverage |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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