Correlation Between Edison Cobalt and Australian Strategic
Can any of the company-specific risk be diversified away by investing in both Edison Cobalt and Australian Strategic 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 Edison Cobalt and Australian Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison Cobalt Corp and Australian Strategic Materials, you can compare the effects of market volatilities on Edison Cobalt and Australian Strategic 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 Edison Cobalt with a short position of Australian Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison Cobalt and Australian Strategic.
Diversification Opportunities for Edison Cobalt and Australian Strategic
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Edison and Australian is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Edison Cobalt Corp and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic and Edison Cobalt 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 Edison Cobalt Corp are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Edison Cobalt i.e., Edison Cobalt and Australian Strategic go up and down completely randomly.
Pair Corralation between Edison Cobalt and Australian Strategic
Assuming the 90 days horizon Edison Cobalt Corp is expected to generate 1.8 times more return on investment than Australian Strategic. However, Edison Cobalt is 1.8 times more volatile than Australian Strategic Materials. It trades about -0.11 of its potential returns per unit of risk. Australian Strategic Materials is currently generating about -0.38 per unit of risk. If you would invest 7.93 in Edison Cobalt Corp on August 29, 2024 and sell it today you would lose (1.48) from holding Edison Cobalt Corp or give up 18.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Edison Cobalt Corp vs. Australian Strategic Materials
Performance |
| Timeline |
| Edison Cobalt Corp |
| Australian Strategic |
Edison Cobalt and Australian Strategic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison Cobalt and Australian Strategic
The main advantage of trading using opposite Edison Cobalt and Australian Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison Cobalt position performs unexpectedly, Australian Strategic 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 Australian Strategic will offset losses from the drop in Australian Strategic's long position.| Edison Cobalt vs. Rockridge Resources | Edison Cobalt vs. Ameriwest Lithium | Edison Cobalt vs. Osisko Metals Incorporated | Edison Cobalt vs. Volt Lithium Corp |
| Australian Strategic vs. Rockridge Resources | Australian Strategic vs. Ameriwest Lithium | Australian Strategic vs. Osisko Metals Incorporated | Australian Strategic vs. Volt Lithium Corp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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