Correlation Between Empire Metals and Central Asia

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Can any of the company-specific risk be diversified away by investing in both Empire Metals and Central Asia 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 Central Asia 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 Central Asia Metals, you can compare the effects of market volatilities on Empire Metals and Central Asia 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 Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Central Asia.

Diversification Opportunities for Empire Metals and Central Asia

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Empire and Central is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals 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 Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Empire Metals i.e., Empire Metals and Central Asia go up and down completely randomly.

Pair Corralation between Empire Metals and Central Asia

Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 3.19 times more return on investment than Central Asia. However, Empire Metals is 3.19 times more volatile than Central Asia Metals. It trades about 0.07 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.01 per unit of risk. If you would invest  170.00  in Empire Metals Limited on August 30, 2024 and sell it today you would earn a total of  420.00  from holding Empire Metals Limited or generate 247.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Empire Metals Limited  vs.  Central Asia Metals

 Performance 
       Timeline  
Empire Metals Limited 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Central Asia Metals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Empire Metals and Central Asia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Empire Metals and Central Asia

The main advantage of trading using opposite Empire Metals and Central Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals position performs unexpectedly, Central Asia 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 Central Asia will offset losses from the drop in Central Asia's long position.
The idea behind Empire Metals Limited and Central Asia Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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