Correlation Between Leading Edge and Hannan Metals
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Hannan Metals 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 Leading Edge and Hannan Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leading Edge Materials and Hannan Metals, you can compare the effects of market volatilities on Leading Edge and Hannan Metals 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 Leading Edge with a short position of Hannan Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Hannan Metals.
Diversification Opportunities for Leading Edge and Hannan Metals
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leading and Hannan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Hannan Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hannan Metals and Leading Edge 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 Leading Edge Materials are associated (or correlated) with Hannan Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hannan Metals has no effect on the direction of Leading Edge i.e., Leading Edge and Hannan Metals go up and down completely randomly.
Pair Corralation between Leading Edge and Hannan Metals
Assuming the 90 days horizon Leading Edge is expected to generate 2.9 times less return on investment than Hannan Metals. In addition to that, Leading Edge is 1.35 times more volatile than Hannan Metals. It trades about 0.02 of its total potential returns per unit of risk. Hannan Metals is currently generating about 0.08 per unit of volatility. If you would invest 41.00 in Hannan Metals on September 3, 2024 and sell it today you would earn a total of 20.00 from holding Hannan Metals or generate 48.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leading Edge Materials vs. Hannan Metals
Performance |
| Timeline |
| Leading Edge Materials |
| Hannan Metals |
Leading Edge and Hannan Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and Hannan Metals
The main advantage of trading using opposite Leading Edge and Hannan Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Hannan Metals 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 Hannan Metals will offset losses from the drop in Hannan Metals' long position.| Leading Edge vs. Algoma Steel Group | Leading Edge vs. Champion Iron | Leading Edge vs. International Zeolite Corp | Leading Edge vs. European Residential Real |
| Hannan Metals vs. Algoma Steel Group | Hannan Metals vs. Champion Iron | Hannan Metals vs. International Zeolite Corp | Hannan Metals vs. European Residential Real |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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