Correlation Between Sterling Metals and Talon Metals
Can any of the company-specific risk be diversified away by investing in both Sterling Metals and Talon Metals 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 Sterling Metals and Talon Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Metals Corp and Talon Metals Corp, you can compare the effects of market volatilities on Sterling Metals and Talon Metals 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 Sterling Metals with a short position of Talon Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Metals and Talon Metals.
Diversification Opportunities for Sterling Metals and Talon Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sterling and Talon is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Metals Corp and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals Corp and Sterling 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 Sterling Metals Corp are associated (or correlated) with Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Sterling Metals i.e., Sterling Metals and Talon Metals go up and down completely randomly.
Pair Corralation between Sterling Metals and Talon Metals
Assuming the 90 days horizon Sterling Metals Corp is expected to generate 3.3 times more return on investment than Talon Metals. However, Sterling Metals is 3.3 times more volatile than Talon Metals Corp. It trades about 0.07 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.03 per unit of risk. If you would invest 2.80 in Sterling Metals Corp on August 29, 2024 and sell it today you would earn a total of 0.17 from holding Sterling Metals Corp or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Sterling Metals Corp vs. Talon Metals Corp
Performance |
| Timeline |
| Sterling Metals Corp |
| Talon Metals Corp |
Sterling Metals and Talon Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Metals and Talon Metals
The main advantage of trading using opposite Sterling Metals and Talon Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Metals position performs unexpectedly, Talon Metals 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 Talon Metals will offset losses from the drop in Talon Metals' long position.| Sterling Metals vs. Rockridge Resources | Sterling Metals vs. Vital Metals Limited | Sterling Metals vs. Ameriwest Lithium | Sterling Metals vs. Osisko Metals Incorporated |
| Talon Metals vs. Pure Energy Minerals | Talon Metals vs. Spearmint Resources | Talon Metals vs. Cruz Cobalt Corp | Talon Metals vs. ioneer |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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