Correlation Between Baker Steel and Neometals

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

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

Diversification Opportunities for Baker Steel and Neometals

-0.34

Correlation Coefficient

Baker Steel  Neometals

Very good diversification

The 3 months correlation between Baker and Neometals is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Baker Steel Resources and Neometals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neometals and Baker Steel 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 Baker Steel Resources are associated (or correlated) with Neometals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neometals has no effect on the direction of Baker Steel i.e., Baker Steel and Neometals go up and down completely randomly.

Pair Corralation between Baker Steel and Neometals

Assuming the 90 days trading horizon Baker Steel Resources is expected to generate 0.54 times more return on investment than Neometals. However, Baker Steel Resources is 1.87 times less risky than Neometals. It trades about 0.23 of its potential returns per unit of risk. Neometals is currently generating about -0.14 per unit of risk. If you would invest  5,350  in Baker Steel Resources on September 19, 2024 and sell it today you would earn a total of  450.00  from holding Baker Steel Resources or generate 8.41% return on investment over 90 days.

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

Baker Steel Resources  vs.  Neometals

Baker Steel Resources

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Baker Steel Resources are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Baker Steel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Neometals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Neometals is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Baker Steel and Neometals

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

The idea behind Baker Steel Resources and Neometals 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.