Correlation Between Metals X and Azimut Exploration

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Can any of the company-specific risk be diversified away by investing in both Metals X and Azimut Exploration 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 Azimut Exploration 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 Azimut Exploration, you can compare the effects of market volatilities on Metals X and Azimut Exploration 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 Azimut Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals X and Azimut Exploration.

Diversification Opportunities for Metals X and Azimut Exploration

-0.17
  Correlation Coefficient

Good diversification

The 3 months correlation between Metals and Azimut is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Metals X Limited and Azimut Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azimut Exploration 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 Azimut Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azimut Exploration has no effect on the direction of Metals X i.e., Metals X and Azimut Exploration go up and down completely randomly.

Pair Corralation between Metals X and Azimut Exploration

Assuming the 90 days horizon Metals X Limited is expected to generate 2.43 times more return on investment than Azimut Exploration. However, Metals X is 2.43 times more volatile than Azimut Exploration. It trades about 0.2 of its potential returns per unit of risk. Azimut Exploration is currently generating about -0.26 per unit of risk. If you would invest  30.00  in Metals X Limited on November 27, 2024 and sell it today you would earn a total of  5.00  from holding Metals X Limited or generate 16.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Metals X Limited  vs.  Azimut Exploration

 Performance 
       Timeline  
Metals X Limited 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Metals X Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Metals X reported solid returns over the last few months and may actually be approaching a breakup point.
Azimut Exploration 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Azimut Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Metals X and Azimut Exploration Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metals X and Azimut Exploration

The main advantage of trading using opposite Metals X and Azimut Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals X position performs unexpectedly, Azimut Exploration 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 Azimut Exploration will offset losses from the drop in Azimut Exploration's long position.
The idea behind Metals X Limited and Azimut Exploration pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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