Correlation Between United States and Metals Exploration

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

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

Diversification Opportunities for United States and Metals Exploration

0.53

Correlation Coefficient

United States  Metals Exploration

Very weak diversification

The 3 months correlation between United and Metals is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc and United States 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 United States Steel are associated (or correlated) with Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of United States i.e., United States and Metals Exploration go up and down completely randomly.

Pair Corralation between United States and Metals Exploration

Assuming the 90 days trading horizon United States Steel is expected to generate 0.93 times more return on investment than Metals Exploration. However, United States Steel is 1.08 times less risky than Metals Exploration. It trades about -0.02 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about -0.03 per unit of risk. If you would invest  3,644  in United States Steel on September 14, 2024 and sell it today you would lose (220.00) from holding United States Steel or give up 6.04% of portfolio value over 90 days.

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

United States Steel  vs.  Metals Exploration Plc

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, United States is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Metals Exploration Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals Exploration Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with United States and Metals Exploration

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

The idea behind United States Steel and Metals Exploration Plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.