Correlation Between Decade Resources and Power Metals
Can any of the company-specific risk be diversified away by investing in both Decade Resources and Power 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 Decade Resources and Power Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Decade Resources and Power Metals Corp, you can compare the effects of market volatilities on Decade Resources and Power 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 Decade Resources with a short position of Power Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Decade Resources and Power Metals.
Diversification Opportunities for Decade Resources and Power Metals
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Decade and Power is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Decade Resources and Power Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metals Corp and Decade Resources 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 Decade Resources are associated (or correlated) with Power Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metals Corp has no effect on the direction of Decade Resources i.e., Decade Resources and Power Metals go up and down completely randomly.
Pair Corralation between Decade Resources and Power Metals
Assuming the 90 days horizon Decade Resources is expected to generate 2.33 times more return on investment than Power Metals. However, Decade Resources is 2.33 times more volatile than Power Metals Corp. It trades about 0.04 of its potential returns per unit of risk. Power Metals Corp is currently generating about 0.06 per unit of risk. If you would invest 3.50 in Decade Resources on September 3, 2024 and sell it today you would lose (0.40) from holding Decade Resources or give up 11.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Decade Resources vs. Power Metals Corp
Performance |
| Timeline |
| Decade Resources |
| Power Metals Corp |
Decade Resources and Power Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Decade Resources and Power Metals
The main advantage of trading using opposite Decade Resources and Power Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Decade Resources position performs unexpectedly, Power 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 Power Metals will offset losses from the drop in Power Metals' long position.| Decade Resources vs. Qubec Nickel Corp | Decade Resources vs. IGO Limited | Decade Resources vs. Avarone Metals | Decade Resources vs. Adriatic Metals PLC |
| Power Metals vs. Qubec Nickel Corp | Power Metals vs. IGO Limited | Power Metals vs. Avarone Metals | Power Metals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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