Correlation Between Collins Foods and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Collins Foods and Metro Mining 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 Collins Foods and Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collins Foods and Metro Mining, you can compare the effects of market volatilities on Collins Foods and Metro Mining 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 Collins Foods with a short position of Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collins Foods and Metro Mining.
Diversification Opportunities for Collins Foods and Metro Mining
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Collins and Metro is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Collins Foods and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining and Collins Foods 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 Collins Foods are associated (or correlated) with Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Collins Foods i.e., Collins Foods and Metro Mining go up and down completely randomly.
Pair Corralation between Collins Foods and Metro Mining
Assuming the 90 days trading horizon Collins Foods is expected to generate 8.86 times less return on investment than Metro Mining. But when comparing it to its historical volatility, Collins Foods is 2.42 times less risky than Metro Mining. It trades about 0.02 of its potential returns per unit of risk. Metro Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Metro Mining on September 4, 2024 and sell it today you would earn a total of 4.40 from holding Metro Mining or generate 220.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collins Foods vs. Metro Mining
Performance |
| Timeline |
| Collins Foods |
| Metro Mining |
Collins Foods and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collins Foods and Metro Mining
The main advantage of trading using opposite Collins Foods and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collins Foods position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Collins Foods vs. Aneka Tambang Tbk | Collins Foods vs. BHP Group Limited | Collins Foods vs. Commonwealth Bank of | Collins Foods vs. Commonwealth Bank of |
| Metro Mining vs. Northern Star Resources | Metro Mining vs. Evolution Mining | Metro Mining vs. Bluescope Steel | Metro Mining vs. Sandfire Resources NL |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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