Correlation Between Metals X and Nevada King

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

Diversification Opportunities for Metals X and Nevada King

0.16
  Correlation Coefficient

Average diversification

The 3 months correlation between Metals and Nevada is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Metals X Limited and Nevada King Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada King Gold 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 Nevada King. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada King Gold has no effect on the direction of Metals X i.e., Metals X and Nevada King go up and down completely randomly.

Pair Corralation between Metals X and Nevada King

Assuming the 90 days horizon Metals X Limited is expected to generate 1.31 times more return on investment than Nevada King. However, Metals X is 1.31 times more volatile than Nevada King Gold. It trades about 0.05 of its potential returns per unit of risk. Nevada King Gold is currently generating about 0.01 per unit of risk. If you would invest  20.00  in Metals X Limited on November 27, 2024 and sell it today you would earn a total of  15.00  from holding Metals X Limited or generate 75.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

Metals X Limited  vs.  Nevada King Gold

 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.
Nevada King Gold 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Nevada King Gold has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Nevada King is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Metals X and Nevada King Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Metals X and Nevada King

The main advantage of trading using opposite Metals X and Nevada King positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals X position performs unexpectedly, Nevada King 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 Nevada King will offset losses from the drop in Nevada King's long position.
The idea behind Metals X Limited and Nevada King Gold 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.
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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