Correlation Between MetaLabs and Daedong Metals

Can any of the company-specific risk be diversified away by investing in both MetaLabs and Daedong 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 MetaLabs and Daedong Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MetaLabs Co and Daedong Metals Co, you can compare the effects of market volatilities on MetaLabs and Daedong 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 MetaLabs with a short position of Daedong Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetaLabs and Daedong Metals.

Diversification Opportunities for MetaLabs and Daedong Metals

-0.47

Correlation Coefficient

MetaLabs  Daedong Metals

Very good diversification

The 3 months correlation between MetaLabs and Daedong is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding MetaLabs Co and Daedong Metals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daedong Metals and MetaLabs 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 MetaLabs Co are associated (or correlated) with Daedong Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daedong Metals has no effect on the direction of MetaLabs i.e., MetaLabs and Daedong Metals go up and down completely randomly.

Pair Corralation between MetaLabs and Daedong Metals

Assuming the 90 days trading horizon MetaLabs Co is expected to under-perform the Daedong Metals. But the stock apears to be less risky and, when comparing its historical volatility, MetaLabs Co is 2.09 times less risky than Daedong Metals. The stock trades about -0.17 of its potential returns per unit of risk. The Daedong Metals Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  677,000  in Daedong Metals Co on September 1, 2024 and sell it today you would earn a total of  65,000  from holding Daedong Metals Co or generate 9.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

MetaLabs Co  vs.  Daedong Metals Co

MetaLabs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MetaLabs Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Daedong Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daedong Metals Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Daedong Metals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MetaLabs and Daedong Metals

The main advantage of trading using opposite MetaLabs and Daedong Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetaLabs position performs unexpectedly, Daedong 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 Daedong Metals will offset losses from the drop in Daedong Metals' long position.

The idea behind MetaLabs Co and Daedong Metals Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.