Correlation Between American Helium and Bushveld Minerals

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

By analyzing existing cross correlation between American Helium and Bushveld Minerals Limited, you can compare the effects of market volatilities on American Helium and Bushveld Minerals 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 American Helium with a short position of Bushveld Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Helium and Bushveld Minerals.

Diversification Opportunities for American Helium and Bushveld Minerals

0.21

Correlation Coefficient

American Helium  Bushveld Minerals

Modest diversification

The 3 months correlation between American and Bushveld is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Helium and Bushveld Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bushveld Minerals and American Helium 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 American Helium are associated (or correlated) with Bushveld Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bushveld Minerals has no effect on the direction of American Helium i.e., American Helium and Bushveld Minerals go up and down completely randomly.

Pair Corralation between American Helium and Bushveld Minerals

Assuming the 90 days horizon American Helium is expected to generate 3.55 times less return on investment than Bushveld Minerals. But when comparing it to its historical volatility, American Helium is 1.75 times less risky than Bushveld Minerals. It trades about 0.11 of its potential returns per unit of risk. Bushveld Minerals Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1.90  in Bushveld Minerals Limited on September 14, 2024 and sell it today you would lose (1.38) from holding Bushveld Minerals Limited or give up 72.63% of portfolio value over 90 days.

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

American Helium  vs.  Bushveld Minerals Limited

American Helium

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Helium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, American Helium reported solid returns over the last few months and may actually be approaching a breakup point.

Bushveld Minerals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bushveld Minerals Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bushveld Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Helium and Bushveld Minerals

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

The idea behind American Helium and Bushveld Minerals Limited 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 Anywhere module to track or share privately all of your investments from the convenience of any device.