Correlation Between Metals X and Red Moon
Can any of the company-specific risk be diversified away by investing in both Metals X and Red Moon 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 Red Moon 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 Red Moon Resources, you can compare the effects of market volatilities on Metals X and Red Moon 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 Red Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals X and Red Moon.
Diversification Opportunities for Metals X and Red Moon
Modest diversification
The 3 months correlation between Metals and Red is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Metals X Limited and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Metals X i.e., Metals X and Red Moon go up and down completely randomly.
Pair Corralation between Metals X and Red Moon
Assuming the 90 days horizon Metals X Limited is expected to under-perform the Red Moon. In addition to that, Metals X is 2.75 times more volatile than Red Moon Resources. It trades about -0.09 of its total potential returns per unit of risk. Red Moon Resources is currently generating about -0.18 per unit of volatility. If you would invest 47.00 in Red Moon Resources on September 3, 2024 and sell it today you would lose (3.00) from holding Red Moon Resources or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metals X Limited vs. Red Moon Resources
Performance |
| Timeline |
| Metals X Limited |
| Red Moon Resources |
Metals X and Red Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metals X and Red Moon
The main advantage of trading using opposite Metals X and Red Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals X position performs unexpectedly, Red Moon 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 Red Moon will offset losses from the drop in Red Moon's long position.| Metals X vs. Qubec Nickel Corp | Metals X vs. IGO Limited | Metals X vs. Avarone Metals | Metals X vs. Adriatic Metals PLC |
| Red Moon vs. Qubec Nickel Corp | Red Moon vs. IGO Limited | Red Moon vs. Avarone Metals | Red Moon vs. Adriatic Metals PLC |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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