Correlation Between Metals X and Arafura Resources
Can any of the company-specific risk be diversified away by investing in both Metals X and Arafura Resources 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 Metals X and Arafura Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metals X Limited and Arafura Resources, you can compare the effects of market volatilities on Metals X and Arafura Resources 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 Metals X with a short position of Arafura Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals X and Arafura Resources.
Diversification Opportunities for Metals X and Arafura Resources
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metals and Arafura is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Metals X Limited and Arafura Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arafura Resources and Metals X 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 Metals X Limited are associated (or correlated) with Arafura Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arafura Resources has no effect on the direction of Metals X i.e., Metals X and Arafura Resources go up and down completely randomly.
Pair Corralation between Metals X and Arafura Resources
Assuming the 90 days horizon Metals X Limited is expected to generate 0.79 times more return on investment than Arafura Resources. However, Metals X Limited is 1.27 times less risky than Arafura Resources. It trades about -0.02 of its potential returns per unit of risk. Arafura Resources is currently generating about -0.06 per unit of risk. If you would invest 30.00 in Metals X Limited on August 25, 2024 and sell it today you would lose (3.00) from holding Metals X Limited or give up 10.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metals X Limited vs. Arafura Resources
Performance |
| Timeline |
| Metals X Limited |
| Arafura Resources |
Metals X and Arafura Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metals X and Arafura Resources
The main advantage of trading using opposite Metals X and Arafura Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals X position performs unexpectedly, Arafura Resources 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 Arafura Resources will offset losses from the drop in Arafura Resources' long position.| Metals X vs. Norra Metals Corp | Metals X vs. ZincX Resources Corp | Metals X vs. Nuinsco Resources Limited | Metals X vs. South Star Battery |
| Arafura Resources vs. Norra Metals Corp | Arafura Resources vs. ZincX Resources Corp | Arafura Resources vs. Nuinsco Resources Limited | Arafura Resources vs. South Star Battery |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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