Correlation Between Global Energy and Leading Edge
Can any of the company-specific risk be diversified away by investing in both Global Energy and Leading Edge 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 Global Energy and Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Energy Metals and Leading Edge Materials, you can compare the effects of market volatilities on Global Energy and Leading Edge 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 Global Energy with a short position of Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Energy and Leading Edge.
Diversification Opportunities for Global Energy and Leading Edge
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Leading is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Global Energy 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 Global Energy Metals are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Global Energy i.e., Global Energy and Leading Edge go up and down completely randomly.
Pair Corralation between Global Energy and Leading Edge
Assuming the 90 days horizon Global Energy Metals is expected to generate 2.6 times more return on investment than Leading Edge. However, Global Energy is 2.6 times more volatile than Leading Edge Materials. It trades about 0.13 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.04 per unit of risk. If you would invest 1.00 in Global Energy Metals on August 29, 2024 and sell it today you would earn a total of 0.23 from holding Global Energy Metals or generate 23.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Global Energy Metals vs. Leading Edge Materials
Performance |
| Timeline |
| Global Energy Metals |
| Leading Edge Materials |
Global Energy and Leading Edge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Energy and Leading Edge
The main advantage of trading using opposite Global Energy and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Energy position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.| Global Energy vs. Rockridge Resources | Global Energy vs. Ameriwest Lithium | Global Energy vs. Osisko Metals Incorporated | Global Energy vs. Volt Lithium Corp |
| Leading Edge vs. Grid Metals Corp | Leading Edge vs. Fireweed Zinc | Leading Edge vs. First American Silver | Leading Edge vs. Australian Strategic Materials |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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