Correlation Between Strategic Metals and Lara Exploration
Can any of the company-specific risk be diversified away by investing in both Strategic Metals and Lara Exploration 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 Strategic Metals and Lara Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Metals and Lara Exploration, you can compare the effects of market volatilities on Strategic Metals and Lara Exploration 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 Strategic Metals with a short position of Lara Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Metals and Lara Exploration.
Diversification Opportunities for Strategic Metals and Lara Exploration
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Strategic and Lara is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Metals and Lara Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lara Exploration and Strategic 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 Strategic Metals are associated (or correlated) with Lara Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lara Exploration has no effect on the direction of Strategic Metals i.e., Strategic Metals and Lara Exploration go up and down completely randomly.
Pair Corralation between Strategic Metals and Lara Exploration
Assuming the 90 days horizon Strategic Metals is expected to generate 1.53 times more return on investment than Lara Exploration. However, Strategic Metals is 1.53 times more volatile than Lara Exploration. It trades about -0.02 of its potential returns per unit of risk. Lara Exploration is currently generating about -0.07 per unit of risk. If you would invest 18.00 in Strategic Metals on August 31, 2024 and sell it today you would lose (1.00) from holding Strategic Metals or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Metals vs. Lara Exploration
Performance |
| Timeline |
| Strategic Metals |
| Lara Exploration |
Strategic Metals and Lara Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Metals and Lara Exploration
The main advantage of trading using opposite Strategic Metals and Lara Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Metals position performs unexpectedly, Lara Exploration 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 Lara Exploration will offset losses from the drop in Lara Exploration's long position.| Strategic Metals vs. Orbit Garant Drilling | Strategic Metals vs. TGS Esports | Strategic Metals vs. NorthWest Healthcare Properties | Strategic Metals vs. Reliq Health Technologies |
| Lara Exploration vs. Riverside Resources | Lara Exploration vs. Strategic Metals | Lara Exploration vs. Midland Exploration | Lara Exploration vs. Transition Metals Corp |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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