Correlation Between Leading Edge and NGEx Minerals
Can any of the company-specific risk be diversified away by investing in both Leading Edge and NGEx Minerals 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 NGEx Minerals 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 NGEx Minerals, you can compare the effects of market volatilities on Leading Edge and NGEx Minerals 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 NGEx Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leading Edge and NGEx Minerals.
Diversification Opportunities for Leading Edge and NGEx Minerals
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Leading and NGEx is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Leading Edge Materials and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals 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 NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of Leading Edge i.e., Leading Edge and NGEx Minerals go up and down completely randomly.
Pair Corralation between Leading Edge and NGEx Minerals
Assuming the 90 days horizon Leading Edge Materials is expected to generate 7.44 times more return on investment than NGEx Minerals. However, Leading Edge is 7.44 times more volatile than NGEx Minerals. It trades about 0.34 of its potential returns per unit of risk. NGEx Minerals is currently generating about 0.15 per unit of risk. If you would invest 6.10 in Leading Edge Materials on December 2, 2024 and sell it today you would earn a total of 8.90 from holding Leading Edge Materials or generate 145.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leading Edge Materials vs. NGEx Minerals
Performance |
| Timeline |
| Leading Edge Materials |
| NGEx Minerals |
Leading Edge and NGEx Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leading Edge and NGEx Minerals
The main advantage of trading using opposite Leading Edge and NGEx Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leading Edge position performs unexpectedly, NGEx Minerals 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 NGEx Minerals will offset losses from the drop in NGEx Minerals' long position.| Leading Edge vs. Grid Metals Corp | ||
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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