Correlation Between Hot Chili and World Copper
Can any of the company-specific risk be diversified away by investing in both Hot Chili and World Copper 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 Hot Chili and World Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hot Chili Limited and World Copper, you can compare the effects of market volatilities on Hot Chili and World Copper 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 Hot Chili with a short position of World Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hot Chili and World Copper.
Diversification Opportunities for Hot Chili and World Copper
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hot and World is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hot Chili Limited and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper and Hot Chili 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 Hot Chili Limited are associated (or correlated) with World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of Hot Chili i.e., Hot Chili and World Copper go up and down completely randomly.
Pair Corralation between Hot Chili and World Copper
Assuming the 90 days horizon Hot Chili Limited is expected to under-perform the World Copper. But the otc stock apears to be less risky and, when comparing its historical volatility, Hot Chili Limited is 1.37 times less risky than World Copper. The otc stock trades about -0.15 of its potential returns per unit of risk. The World Copper is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 6.25 in World Copper on September 3, 2024 and sell it today you would lose (0.55) from holding World Copper or give up 8.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hot Chili Limited vs. World Copper
Performance |
| Timeline |
| Hot Chili Limited |
| World Copper |
Hot Chili and World Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hot Chili and World Copper
The main advantage of trading using opposite Hot Chili and World Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hot Chili position performs unexpectedly, World Copper 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 World Copper will offset losses from the drop in World Copper's long position.| Hot Chili vs. Three Valley Copper | Hot Chili vs. World Copper | Hot Chili vs. CopperCorp Resources | Hot Chili vs. Copper Fox Metals |
| World Copper vs. Hot Chili Limited | World Copper vs. Three Valley Copper | World Copper vs. Los Andes Copper | World Copper vs. QC Copper and |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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