Correlation Between Centaurus Metals and China Molybdenum

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

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

Diversification Opportunities for Centaurus Metals and China Molybdenum

0.88

Correlation Coefficient

Centaurus Metals  China Molybdenum

Very poor diversification

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

Pair Corralation between Centaurus Metals and China Molybdenum

Assuming the 90 days horizon Centaurus Metals Limited is expected to generate 1.06 times more return on investment than China Molybdenum. However, Centaurus Metals is 1.06 times more volatile than China Molybdenum Co. It trades about -0.12 of its potential returns per unit of risk. China Molybdenum Co is currently generating about -0.19 per unit of risk. If you would invest  28.00  in Centaurus Metals Limited on September 22, 2024 and sell it today you would lose (4.00) from holding Centaurus Metals Limited or give up 14.29% of portfolio value over 90 days.

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

Centaurus Metals Limited  vs.  China Molybdenum Co

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.

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.

Pair Trading with Centaurus Metals and China Molybdenum

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

The idea behind Centaurus Metals Limited and China Molybdenum Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.