Correlation Between Emetals and Itech Minerals

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

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

Diversification Opportunities for Emetals and Itech Minerals

-0.52

Correlation Coefficient

Emetals  Itech Minerals

Excellent diversification

The 3 months correlation between Emetals and Itech is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Emetals and Itech Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itech Minerals and Emetals 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 Emetals are associated (or correlated) with Itech Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itech Minerals has no effect on the direction of Emetals i.e., Emetals and Itech Minerals go up and down completely randomly.

Pair Corralation between Emetals and Itech Minerals

Assuming the 90 days trading horizon Emetals is expected to generate 1.26 times more return on investment than Itech Minerals. However, Emetals is 1.26 times more volatile than Itech Minerals. It trades about 0.1 of its potential returns per unit of risk. Itech Minerals is currently generating about -0.1 per unit of risk. If you would invest  0.40  in Emetals on September 17, 2024 and sell it today you would earn a total of  0.10  from holding Emetals or generate 25.0% return on investment over 90 days.

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

Emetals  vs.  Itech Minerals

Emetals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emetals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Emetals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Itech Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itech Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Emetals and Itech Minerals

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

The idea behind Emetals and Itech Minerals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.