Correlation Between Group 6 and Carlton Investments
Can any of the company-specific risk be diversified away by investing in both Group 6 and Carlton Investments 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 Group 6 and Carlton Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 6 Metals and Carlton Investments, you can compare the effects of market volatilities on Group 6 and Carlton Investments 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 Group 6 with a short position of Carlton Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 6 and Carlton Investments.
Diversification Opportunities for Group 6 and Carlton Investments
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Group and Carlton is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Group 6 Metals and Carlton Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlton Investments and Group 6 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 Group 6 Metals are associated (or correlated) with Carlton Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlton Investments has no effect on the direction of Group 6 i.e., Group 6 and Carlton Investments go up and down completely randomly.
Pair Corralation between Group 6 and Carlton Investments
Assuming the 90 days trading horizon Group 6 Metals is expected to generate 8.12 times more return on investment than Carlton Investments. However, Group 6 is 8.12 times more volatile than Carlton Investments. It trades about 0.01 of its potential returns per unit of risk. Carlton Investments is currently generating about 0.05 per unit of risk. If you would invest 3.00 in Group 6 Metals on September 1, 2024 and sell it today you would lose (0.50) from holding Group 6 Metals or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Group 6 Metals vs. Carlton Investments
Performance |
| Timeline |
| Group 6 Metals |
| Carlton Investments |
Group 6 and Carlton Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 6 and Carlton Investments
The main advantage of trading using opposite Group 6 and Carlton Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 6 position performs unexpectedly, Carlton Investments 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 Carlton Investments will offset losses from the drop in Carlton Investments' long position.| Group 6 vs. Northern Star Resources | Group 6 vs. Evolution Mining | Group 6 vs. Bluescope Steel | Group 6 vs. Sandfire Resources NL |
| Carlton Investments vs. GQG Partners DRC | Carlton Investments vs. MFF Capital Investments | Carlton Investments vs. Metrics Master Income | Carlton Investments vs. L1 Long Short |
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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