Correlation Between Metro Mining and Paladin Energy
Can any of the company-specific risk be diversified away by investing in both Metro Mining and Paladin Energy 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 Metro Mining and Paladin Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Mining and Paladin Energy, you can compare the effects of market volatilities on Metro Mining and Paladin Energy 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 Metro Mining with a short position of Paladin Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Mining and Paladin Energy.
Diversification Opportunities for Metro Mining and Paladin Energy
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Metro and Paladin is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Metro Mining and Paladin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paladin Energy and Metro Mining 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 Metro Mining are associated (or correlated) with Paladin Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paladin Energy has no effect on the direction of Metro Mining i.e., Metro Mining and Paladin Energy go up and down completely randomly.
Pair Corralation between Metro Mining and Paladin Energy
Assuming the 90 days trading horizon Metro Mining is expected to generate 1.39 times more return on investment than Paladin Energy. However, Metro Mining is 1.39 times more volatile than Paladin Energy. It trades about 0.08 of its potential returns per unit of risk. Paladin Energy is currently generating about 0.02 per unit of risk. If you would invest 1.50 in Metro Mining on September 4, 2024 and sell it today you would earn a total of 4.90 from holding Metro Mining or generate 326.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Metro Mining vs. Paladin Energy
Performance |
| Timeline |
| Metro Mining |
| Paladin Energy |
Metro Mining and Paladin Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Metro Mining and Paladin Energy
The main advantage of trading using opposite Metro Mining and Paladin Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Mining position performs unexpectedly, Paladin Energy 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 Paladin Energy will offset losses from the drop in Paladin Energy's long position.| Metro Mining vs. Northern Star Resources | Metro Mining vs. Evolution Mining | Metro Mining vs. Bluescope Steel | Metro Mining vs. Sandfire Resources NL |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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