Correlation Between Leading Edge and Grid Metals
Can any of the company-specific risk be diversified away by investing in both Leading Edge and Grid 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 Grid 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 Grid Metals Corp, you can compare the effects of market volatilities on Leading Edge and Grid 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 Grid Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and Grid Metals.
Diversification Opportunities for Leading Edge and Grid Metals
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Leading and Grid is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp 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 Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Leading Edge i.e., Leading Edge and Grid Metals go up and down completely randomly.
Pair Corralation between Leading Edge and Grid Metals
Assuming the 90 days horizon Leading Edge Materials is expected to generate 0.63 times more return on investment than Grid Metals. However, Leading Edge Materials is 1.59 times less risky than Grid Metals. It trades about -0.04 of its potential returns per unit of risk. Grid Metals Corp is currently generating about -0.18 per unit of risk. If you would invest 7.10 in Leading Edge Materials on August 29, 2024 and sell it today you would lose (0.50) from holding Leading Edge Materials or give up 7.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Leading Edge Materials vs. Grid Metals Corp
Performance |
| Timeline |
| Leading Edge Materials |
| Grid Metals Corp |
Leading Edge and Grid Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and Grid Metals
The main advantage of trading using opposite Leading Edge and Grid Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, Grid 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 Grid Metals will offset losses from the drop in Grid Metals' long position.| 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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