Correlation Between Stelar Metals and IXUP
Can any of the company-specific risk be diversified away by investing in both Stelar Metals and IXUP 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 Stelar Metals and IXUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stelar Metals and IXUP, you can compare the effects of market volatilities on Stelar Metals and IXUP 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 Stelar Metals with a short position of IXUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stelar Metals and IXUP.
Diversification Opportunities for Stelar Metals and IXUP
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Stelar and IXUP is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and IXUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXUP and Stelar 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 Stelar Metals are associated (or correlated) with IXUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXUP has no effect on the direction of Stelar Metals i.e., Stelar Metals and IXUP go up and down completely randomly.
Pair Corralation between Stelar Metals and IXUP
Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the IXUP. But the stock apears to be less risky and, when comparing its historical volatility, Stelar Metals is 2.32 times less risky than IXUP. The stock trades about -0.28 of its potential returns per unit of risk. The IXUP is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1.25 in IXUP on August 29, 2024 and sell it today you would lose (0.05) from holding IXUP or give up 4.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stelar Metals vs. IXUP
Performance |
| Timeline |
| Stelar Metals |
| IXUP |
Stelar Metals and IXUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stelar Metals and IXUP
The main advantage of trading using opposite Stelar Metals and IXUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stelar Metals position performs unexpectedly, IXUP 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 IXUP will offset losses from the drop in IXUP's long position.| Stelar Metals vs. Northern Star Resources | Stelar Metals vs. Evolution Mining | Stelar Metals vs. Bluescope Steel | Stelar Metals vs. Sandfire Resources NL |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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