Correlation Between Sky Metals and Metro Mining
Can any of the company-specific risk be diversified away by investing in both Sky Metals and Metro Mining 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 Metro Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Metro Mining, you can compare the effects of market volatilities on Sky Metals and Metro Mining 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 Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Metro Mining.
Diversification Opportunities for Sky Metals and Metro Mining
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sky and Metro is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining 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 Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Sky Metals i.e., Sky Metals and Metro Mining go up and down completely randomly.
Pair Corralation between Sky Metals and Metro Mining
Assuming the 90 days trading horizon Sky Metals is expected to generate 1.33 times more return on investment than Metro Mining. However, Sky Metals is 1.33 times more volatile than Metro Mining. It trades about 0.19 of its potential returns per unit of risk. Metro Mining is currently generating about 0.24 per unit of risk. If you would invest 3.20 in Sky Metals on September 12, 2024 and sell it today you would earn a total of 2.30 from holding Sky Metals or generate 71.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.46% |
| Values | Daily Returns |
Sky Metals vs. Metro Mining
Performance |
| Timeline |
| Sky Metals |
| Metro Mining |
Sky Metals and Metro Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Metro Mining
The main advantage of trading using opposite Sky Metals and Metro Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals position performs unexpectedly, Metro Mining 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 Metro Mining will offset losses from the drop in Metro Mining's long position.| Sky Metals vs. Champion Iron | Sky Metals vs. Australian Strategic Materials | Sky Metals vs. Ras Technology Holdings | Sky Metals vs. Red Hill Iron |
| Metro Mining vs. Charter Hall Retail | Metro Mining vs. TTG Fintech | Metro Mining vs. Genetic Technologies | Metro Mining vs. Patriot Battery 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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