Correlation Between Empire Metals and Cornish Metals
Can any of the company-specific risk be diversified away by investing in both Empire Metals and Cornish 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 Empire Metals and Cornish Metals 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 Cornish Metals, you can compare the effects of market volatilities on Empire Metals and Cornish 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 Empire Metals with a short position of Cornish Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and Cornish Metals.
Diversification Opportunities for Empire Metals and Cornish Metals
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Empire and Cornish is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish 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 Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of Empire Metals i.e., Empire Metals and Cornish Metals go up and down completely randomly.
Pair Corralation between Empire Metals and Cornish Metals
Assuming the 90 days trading horizon Empire Metals Limited is expected to generate 1.53 times more return on investment than Cornish Metals. However, Empire Metals is 1.53 times more volatile than Cornish Metals. It trades about 0.07 of its potential returns per unit of risk. Cornish 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 Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Empire Metals Limited vs. Cornish Metals
Performance |
| Timeline |
| Empire Metals Limited |
| Cornish Metals |
Empire Metals and Cornish Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire Metals and Cornish Metals
The main advantage of trading using opposite Empire Metals and Cornish Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals position performs unexpectedly, Cornish 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 Cornish Metals will offset losses from the drop in Cornish Metals' long position.| Empire Metals vs. Air Products Chemicals | Empire Metals vs. Sealed Air Corp | Empire Metals vs. Pentair PLC | Empire Metals vs. Advanced Medical Solutions |
| Cornish Metals vs. DFS Furniture PLC | Cornish Metals vs. American Homes 4 | Cornish Metals vs. Fortune Brands Home | Cornish Metals vs. Synthomer 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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