Correlation Between Grid Metals and Leading Edge

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Can any of the company-specific risk be diversified away by investing in both Grid Metals and Leading Edge 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 Grid Metals and Leading Edge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grid Metals Corp and Leading Edge Materials, you can compare the effects of market volatilities on Grid Metals and Leading Edge 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 Grid Metals with a short position of Leading Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grid Metals and Leading Edge.

Diversification Opportunities for Grid Metals and Leading Edge

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Grid and Leading is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Grid Metals Corp and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials and Grid 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 Grid Metals Corp are associated (or correlated) with Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Grid Metals i.e., Grid Metals and Leading Edge go up and down completely randomly.

Pair Corralation between Grid Metals and Leading Edge

Assuming the 90 days horizon Grid Metals Corp is expected to under-perform the Leading Edge. But the otc stock apears to be less risky and, when comparing its historical volatility, Grid Metals Corp is 1.68 times less risky than Leading Edge. The otc stock trades about -0.09 of its potential returns per unit of risk. The Leading Edge Materials is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Leading Edge Materials on October 25, 2024 and sell it today you would lose (0.50) from holding Leading Edge Materials or give up 7.69% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy90.48%
ValuesDaily Returns

Grid Metals Corp  vs.  Leading Edge Materials

 Performance 
       Timeline  
Grid Metals Corp 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Grid Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Leading Edge Materials 

Risk-Adjusted Performance

0 of 100

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

Grid Metals and Leading Edge Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grid Metals and Leading Edge

The main advantage of trading using opposite Grid Metals and Leading Edge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grid Metals position performs unexpectedly, Leading Edge 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 Leading Edge will offset losses from the drop in Leading Edge's long position.
The idea behind Grid Metals Corp and Leading Edge Materials 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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