Correlation Between Sky Metals and Global Masters
Can any of the company-specific risk be diversified away by investing in both Sky Metals and Global Masters 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 Sky Metals and Global Masters into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Global Masters, you can compare the effects of market volatilities on Sky Metals and Global Masters 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 Sky Metals with a short position of Global Masters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Global Masters.
Diversification Opportunities for Sky Metals and Global Masters
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sky and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Global Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Masters and Sky 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 Sky Metals are associated (or correlated) with Global Masters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Masters has no effect on the direction of Sky Metals i.e., Sky Metals and Global Masters go up and down completely randomly.
Pair Corralation between Sky Metals and Global Masters
Assuming the 90 days trading horizon Sky Metals is expected to generate 4.0 times more return on investment than Global Masters. However, Sky Metals is 4.0 times more volatile than Global Masters. It trades about 0.05 of its potential returns per unit of risk. Global Masters is currently generating about 0.1 per unit of risk. If you would invest 3.60 in Sky Metals on September 3, 2024 and sell it today you would earn a total of 1.50 from holding Sky Metals or generate 41.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sky Metals vs. Global Masters
Performance |
| Timeline |
| Sky Metals |
| Global Masters |
Sky Metals and Global Masters Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Global Masters
The main advantage of trading using opposite Sky Metals and Global Masters positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals position performs unexpectedly, Global Masters 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 Global Masters will offset losses from the drop in Global Masters' long position.| Sky Metals vs. Northern Star Resources | Sky Metals vs. Evolution Mining | Sky Metals vs. Bluescope Steel | Sky Metals vs. Aneka Tambang Tbk |
| Global Masters vs. Dexus Convenience Retail | Global Masters vs. Sky Metals | Global Masters vs. Hutchison Telecommunications | Global Masters vs. Stelar Metals |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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