Correlation Between Leading Edge and South Pacific
Can any of the company-specific risk be diversified away by investing in both Leading Edge and South Pacific 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 South Pacific 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 South Pacific Metals, you can compare the effects of market volatilities on Leading Edge and South Pacific 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 South Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and South Pacific.
Diversification Opportunities for Leading Edge and South Pacific
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Leading and South is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific 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 South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Leading Edge i.e., Leading Edge and South Pacific go up and down completely randomly.
Pair Corralation between Leading Edge and South Pacific
Assuming the 90 days horizon Leading Edge Materials is expected to under-perform the South Pacific. In addition to that, Leading Edge is 1.02 times more volatile than South Pacific Metals. It trades about -0.09 of its total potential returns per unit of risk. South Pacific Metals is currently generating about 0.11 per unit of volatility. If you would invest 45.00 in South Pacific Metals on November 5, 2024 and sell it today you would earn a total of 4.00 from holding South Pacific Metals or generate 8.89% 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. South Pacific Metals
Performance |
| Timeline |
| Leading Edge Materials |
| South Pacific Metals |
Leading Edge and South Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and South Pacific
The main advantage of trading using opposite Leading Edge and South Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, South Pacific 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 South Pacific will offset losses from the drop in South Pacific's long position.| Leading Edge vs. Hannan Metals | Leading Edge vs. Mkango Resources | Leading Edge vs. Elcora Advanced Materials | Leading Edge vs. Midnight Sun Mining |
| South Pacific vs. Newmont Goldcorp Corp | South Pacific vs. Agnico Eagle Mines | South Pacific vs. Barrick Gold Corp | South Pacific vs. Wheaton Precious Metals |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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