Correlation Between Critical Elements and New Age

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

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

Diversification Opportunities for Critical Elements and New Age

0.56

Correlation Coefficient

Critical Elements  New Age

Very weak diversification

The 3 months correlation between Critical and New is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Critical Elements and New Age Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Age Metals and Critical Elements 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 Critical Elements are associated (or correlated) with New Age. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Age Metals has no effect on the direction of Critical Elements i.e., Critical Elements and New Age go up and down completely randomly.

Pair Corralation between Critical Elements and New Age

Assuming the 90 days horizon Critical Elements is expected to generate 2.01 times less return on investment than New Age. But when comparing it to its historical volatility, Critical Elements is 1.87 times less risky than New Age. It trades about 0.04 of its potential returns per unit of risk. New Age Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8.00  in New Age Metals on September 1, 2024 and sell it today you would earn a total of  0.00  from holding New Age Metals or generate 0.0% return on investment over 90 days.

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

Critical Elements  vs.  New Age Metals

Critical Elements

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Critical Elements are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Critical Elements may actually be approaching a critical reversion point that can send shares even higher in December 2024.

New Age Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Age Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, New Age showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Critical Elements and New Age

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

The idea behind Critical Elements and New Age Metals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.