Correlation Between Empire Metals and MG Plc
Can any of the company-specific risk be diversified away by investing in both Empire Metals and MG Plc 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 MG Plc 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 MG Plc, you can compare the effects of market volatilities on Empire Metals and MG Plc 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 MG Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empire Metals and MG Plc.
Diversification Opportunities for Empire Metals and MG Plc
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Empire and MNG is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Empire Metals Limited and MG Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MG Plc 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 MG Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MG Plc has no effect on the direction of Empire Metals i.e., Empire Metals and MG Plc go up and down completely randomly.
Pair Corralation between Empire Metals and MG Plc
Assuming the 90 days trading horizon Empire Metals Limited is expected to under-perform the MG Plc. In addition to that, Empire Metals is 2.98 times more volatile than MG Plc. It trades about -0.12 of its total potential returns per unit of risk. MG Plc is currently generating about 0.01 per unit of volatility. If you would invest 19,688 in MG Plc on August 31, 2024 and sell it today you would earn a total of 132.00 from holding MG Plc or generate 0.67% 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. MG Plc
Performance |
| Timeline |
| Empire Metals Limited |
| MG Plc |
Empire Metals and MG Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Empire Metals and MG Plc
The main advantage of trading using opposite Empire Metals and MG Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Metals position performs unexpectedly, MG Plc 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 MG Plc will offset losses from the drop in MG Plc's long position.The idea behind Empire Metals Limited and MG Plc 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.| MG Plc vs. Zegona Communications Plc | MG Plc vs. Charter Communications Cl | MG Plc vs. Ameriprise Financial | MG Plc vs. Sydbank |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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