Correlation Between Environmental and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Environmental and Metro Mining 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 Environmental and Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Environmental Group and Metro Mining, you can compare the effects of market volatilities on Environmental and Metro Mining 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 Environmental with a short position of Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Environmental and Metro Mining.
Diversification Opportunities for Environmental and Metro Mining
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Environmental and Metro is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding The Environmental Group and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining and Environmental 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 The Environmental Group are associated (or correlated) with Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Environmental i.e., Environmental and Metro Mining go up and down completely randomly.
Pair Corralation between Environmental and Metro Mining
Assuming the 90 days trading horizon The Environmental Group is expected to under-perform the Metro Mining. In addition to that, Environmental is 1.28 times more volatile than Metro Mining. It trades about -0.43 of its total potential returns per unit of risk. Metro Mining is currently generating about 0.07 per unit of volatility. If you would invest 5.30 in Metro Mining on August 29, 2024 and sell it today you would earn a total of 0.20 from holding Metro Mining or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
The Environmental Group vs. Metro Mining
Performance |
| Timeline |
| The Environmental |
| Metro Mining |
Environmental and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Environmental and Metro Mining
The main advantage of trading using opposite Environmental and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Environmental position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Environmental vs. Global Health | Environmental vs. Sonic Healthcare | Environmental vs. Ora Banda Mining | Environmental vs. Viva Leisure |
| Metro Mining vs. Northern Star Resources | Metro Mining vs. Evolution Mining | Metro Mining vs. Bluescope Steel | Metro Mining vs. Sandfire Resources NL |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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