Correlation Between MRG Metals and Energy Resources
Can any of the company-specific risk be diversified away by investing in both MRG Metals and Energy 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 MRG Metals and Energy Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MRG Metals and Energy Resources, you can compare the effects of market volatilities on MRG Metals and Energy 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 MRG Metals with a short position of Energy Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of MRG Metals and Energy Resources.
Diversification Opportunities for MRG Metals and Energy Resources
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between MRG and Energy is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MRG Metals and Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Resources and MRG Metals 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 MRG Metals are associated (or correlated) with Energy Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Resources has no effect on the direction of MRG Metals i.e., MRG Metals and Energy Resources go up and down completely randomly.
Pair Corralation between MRG Metals and Energy Resources
Assuming the 90 days trading horizon MRG Metals is expected to under-perform the Energy Resources. But the stock apears to be less risky and, when comparing its historical volatility, MRG Metals is 3.06 times less risky than Energy Resources. The stock trades about -0.1 of its potential returns per unit of risk. The Energy Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.30 in Energy Resources on September 3, 2024 and sell it today you would lose (0.10) from holding Energy Resources or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MRG Metals vs. Energy Resources
Performance |
| Timeline |
| MRG Metals |
| Energy Resources |
MRG Metals and Energy Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MRG Metals and Energy Resources
The main advantage of trading using opposite MRG Metals and Energy Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MRG Metals position performs unexpectedly, Energy 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 Energy Resources will offset losses from the drop in Energy Resources' long position.| MRG Metals vs. Northern Star Resources | MRG Metals vs. Evolution Mining | MRG Metals vs. Bluescope Steel | MRG Metals vs. Aneka Tambang Tbk |
| Energy Resources vs. Macquarie Bank Limited | Energy Resources vs. National Australia Bank | Energy Resources vs. Retail Food Group | Energy Resources vs. G8 Education |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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