Correlation Between Avarone Metals and South32

Can any of the company-specific risk be diversified away by investing in both Avarone Metals and South32 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 Avarone Metals and South32 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avarone Metals and South32 Limited, you can compare the effects of market volatilities on Avarone Metals and South32 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 Avarone Metals with a short position of South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avarone Metals and South32.

Diversification Opportunities for Avarone Metals and South32

-0.2

Correlation Coefficient

Avarone Metals  South32

Good diversification

The 3 months correlation between Avarone and South32 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals and South32 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 Limited and Avarone 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 Avarone Metals are associated (or correlated) with South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 Limited has no effect on the direction of Avarone Metals i.e., Avarone Metals and South32 go up and down completely randomly.

Pair Corralation between Avarone Metals and South32

Assuming the 90 days horizon Avarone Metals is expected to under-perform the South32. In addition to that, Avarone Metals is 1.93 times more volatile than South32 Limited. It trades about -0.1 of its total potential returns per unit of risk. South32 Limited is currently generating about 0.0 per unit of volatility. If you would invest  252.00  in South32 Limited on August 31, 2024 and sell it today you would lose (25.00) from holding South32 Limited or give up 9.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Avarone Metals  vs.  South32 Limited

Avarone Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avarone Metals 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 December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

South32 Limited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in South32 Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, South32 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avarone Metals and South32

The main advantage of trading using opposite Avarone Metals and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avarone Metals position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Avarone Metals and South32 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.