Correlation Between Empire Metals and Auction Technology
Can any of the company-specific risk be diversified away by investing in both Empire Metals and Auction Technology 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 Empire Metals and Auction Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Empire Metals Limited and Auction Technology Group, you can compare the effects of market volatilities on Empire Metals and Auction Technology 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 Empire Metals with a short position of Auction Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Auction Technology.
Diversification Opportunities for Empire Metals and Auction Technology
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and Auction is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Auction Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auction Technology and Empire Metals 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 Empire Metals Limited are associated (or correlated) with Auction Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auction Technology has no effect on the direction of Empire Metals i.e., Empire Metals and Auction Technology go up and down completely randomly.
Pair Corralation between Empire Metals and Auction Technology
Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 1.61 times more return on investment than Auction Technology. However, Empire Metals is 1.61 times more volatile than Auction Technology Group. It trades about 0.41 of its potential returns per unit of risk. Auction Technology Group is currently generating about 0.18 per unit of risk. If you would invest 715.00 in Empire Metals Limited on November 7, 2024 and sell it today you would earn a total of 255.00 from holding Empire Metals Limited or generate 35.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire Metals Limited vs. Auction Technology Group
Performance |
| Timeline |
| Empire Metals Limited |
| Auction Technology |
Empire Metals and Auction Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire Metals and Auction Technology
The main advantage of trading using opposite Empire Metals and Auction Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals position performs unexpectedly, Auction Technology 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 Auction Technology will offset losses from the drop in Auction Technology's long position.| Empire Metals vs. Arrow Electronics | Empire Metals vs. New Residential Investment | Empire Metals vs. Datagroup SE | Empire Metals vs. Lowland Investment Co |
| Auction Technology vs. Zoom Video Communications | Auction Technology vs. Empire Metals Limited | Auction Technology vs. Cairo Communication SpA | Auction Technology vs. GoldMining |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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