Correlation Between Aurelia Metals and Base Resources

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

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

Diversification Opportunities for Aurelia Metals and Base Resources

-0.29

Correlation Coefficient

Aurelia Metals  Base Resources

Very good diversification

The 3 months correlation between Aurelia and Base is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aurelia Metals Limited and Base Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Base Resources and Aurelia 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 Aurelia Metals Limited are associated (or correlated) with Base Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Base Resources has no effect on the direction of Aurelia Metals i.e., Aurelia Metals and Base Resources go up and down completely randomly.

Pair Corralation between Aurelia Metals and Base Resources

Assuming the 90 days horizon Aurelia Metals Limited is expected to under-perform the Base Resources. In addition to that, Aurelia Metals is 1.08 times more volatile than Base Resources Limited. It trades about -0.1 of its total potential returns per unit of risk. Base Resources Limited is currently generating about 0.29 per unit of volatility. If you would invest  13.00  in Base Resources Limited on September 4, 2024 and sell it today you would earn a total of  7.00  from holding Base Resources Limited or generate 53.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.92%
Values	Daily Returns

Aurelia Metals Limited  vs.  Base Resources Limited

Aurelia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aurelia Metals 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.

Base Resources

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Base Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Base Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurelia Metals and Base Resources

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

The idea behind Aurelia Metals Limited and Base Resources 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.