Correlation Between Centaurus Metals and OM Holdings

Can any of the company-specific risk be diversified away by investing in both Centaurus Metals and OM Holdings 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 OM Holdings 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 OM Holdings Limited, you can compare the effects of market volatilities on Centaurus Metals and OM Holdings 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 OM Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centaurus Metals and OM Holdings.

Diversification Opportunities for Centaurus Metals and OM Holdings

0.38

Correlation Coefficient

Centaurus Metals  OM Holdings

Weak diversification

The 3 months correlation between Centaurus and OMHLF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals Limited and OM Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OM Holdings Limited 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 OM Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OM Holdings Limited has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and OM Holdings go up and down completely randomly.

Pair Corralation between Centaurus Metals and OM Holdings

Assuming the 90 days horizon Centaurus Metals Limited is expected to generate 1.25 times more return on investment than OM Holdings. However, Centaurus Metals is 1.25 times more volatile than OM Holdings Limited. It trades about -0.04 of its potential returns per unit of risk. OM Holdings Limited is currently generating about -0.12 per unit of risk. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Centaurus Metals Limited  vs.  OM Holdings Limited

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.

OM Holdings Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OM Holdings 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 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 OM Holdings

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

The idea behind Centaurus Metals Limited and OM Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.