Correlation Between China Molybdenum and Centaurus Metals

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

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

Diversification Opportunities for China Molybdenum and Centaurus Metals

0.88

Correlation Coefficient

China Molybdenum  Centaurus Metals

Very poor diversification

The 3 months correlation between China and Centaurus is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding China Molybdenum Co and Centaurus Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centaurus Metals and China Molybdenum 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 China Molybdenum Co are associated (or correlated) with Centaurus Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centaurus Metals has no effect on the direction of China Molybdenum i.e., China Molybdenum and Centaurus Metals go up and down completely randomly.

Pair Corralation between China Molybdenum and Centaurus Metals

Assuming the 90 days horizon China Molybdenum Co is expected to under-perform the Centaurus Metals. But the pink sheet apears to be less risky and, when comparing its historical volatility, China Molybdenum Co is 1.13 times less risky than Centaurus Metals. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Centaurus Metals Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Centaurus Metals Limited on September 22, 2024 and sell it today you would lose (6.00) from holding Centaurus Metals Limited or give up 20.0% of portfolio value over 90 days.

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

China Molybdenum Co  vs.  Centaurus Metals Limited

China Molybdenum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Molybdenum Co 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 essential 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.

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centaurus Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating 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.

Pair Trading with China Molybdenum and Centaurus Metals

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

The idea behind China Molybdenum Co and Centaurus Metals 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.