Correlation Between Mount Gibson and Sky Metals
Can any of the company-specific risk be diversified away by investing in both Mount Gibson and Sky 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 Mount Gibson and Sky Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mount Gibson Iron and Sky Metals, you can compare the effects of market volatilities on Mount Gibson and Sky 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 Mount Gibson with a short position of Sky Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mount Gibson and Sky Metals.
Diversification Opportunities for Mount Gibson and Sky Metals
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mount and Sky is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Sky Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sky Metals and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Sky Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sky Metals has no effect on the direction of Mount Gibson i.e., Mount Gibson and Sky Metals go up and down completely randomly.
Pair Corralation between Mount Gibson and Sky Metals
Assuming the 90 days trading horizon Mount Gibson Iron is expected to under-perform the Sky Metals. But the stock apears to be less risky and, when comparing its historical volatility, Mount Gibson Iron is 1.75 times less risky than Sky Metals. The stock trades about -0.06 of its potential returns per unit of risk. The Sky Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4.00 in Sky Metals on September 1, 2024 and sell it today you would earn a total of 1.10 from holding Sky Metals or generate 27.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mount Gibson Iron vs. Sky Metals
Performance |
| Timeline |
| Mount Gibson Iron |
| Sky Metals |
Mount Gibson and Sky Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mount Gibson and Sky Metals
The main advantage of trading using opposite Mount Gibson and Sky Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson position performs unexpectedly, Sky 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 Sky Metals will offset losses from the drop in Sky Metals' long position.| Mount Gibson vs. Northern Star Resources | Mount Gibson vs. Evolution Mining | Mount Gibson vs. Bluescope Steel | Mount Gibson vs. Sandfire Resources NL |
| Sky Metals vs. Carnegie Clean Energy | Sky Metals vs. Nufarm Finance NZ | Sky Metals vs. Richmond Vanadium Technology | Sky Metals vs. Macquarie Technology Group |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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