Correlation Between Emetals and New Hope

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

By analyzing existing cross correlation between Emetals and New Hope, you can compare the effects of market volatilities on Emetals and New Hope 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 New Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emetals and New Hope.

Diversification Opportunities for Emetals and New Hope

-0.43

Correlation Coefficient

Emetals  New Hope

Very good diversification

The 3 months correlation between Emetals and New is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Emetals and New Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Hope 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 New Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Hope has no effect on the direction of Emetals i.e., Emetals and New Hope go up and down completely randomly.

Pair Corralation between Emetals and New Hope

Assuming the 90 days trading horizon Emetals is expected to under-perform the New Hope. In addition to that, Emetals is 4.21 times more volatile than New Hope. It trades about -0.22 of its total potential returns per unit of risk. New Hope is currently generating about 0.3 per unit of volatility. If you would invest  473.00  in New Hope on September 25, 2024 and sell it today you would earn a total of  33.00  from holding New Hope or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Emetals  vs.  New Hope

Emetals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emetals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Emetals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

New Hope

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New Hope are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, New Hope may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emetals and New Hope

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

The idea behind Emetals and New Hope 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 Transaction History module to view history of all your transactions and understand their impact on performance.