Correlation Between Ardea Resources and Metals X

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

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

Diversification Opportunities for Ardea Resources and Metals X

0.75

Correlation Coefficient

Ardea Resources  Metals X

Poor diversification

The 3 months correlation between Ardea and Metals is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ardea Resources Limited and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited and Ardea Resources 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 Ardea Resources Limited are associated (or correlated) with Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Ardea Resources i.e., Ardea Resources and Metals X go up and down completely randomly.

Pair Corralation between Ardea Resources and Metals X

Assuming the 90 days horizon Ardea Resources Limited is expected to under-perform the Metals X. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ardea Resources Limited is 1.35 times less risky than Metals X. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Metals X Limited is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  33.00  in Metals X Limited on October 1, 2024 and sell it today you would lose (8.00) from holding Metals X Limited or give up 24.24% of portfolio value over 90 days.

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

Ardea Resources Limited  vs.  Metals X Limited

Ardea Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardea Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Metals X Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals X Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ardea Resources and Metals X

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

The idea behind Ardea Resources Limited and Metals X 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.