Correlation Between Future Metals and GreenX Metals

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

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

Diversification Opportunities for Future Metals and GreenX Metals

0.58

Correlation Coefficient

Future Metals  GreenX Metals

Very weak diversification

The 3 months correlation between Future and GreenX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and GreenX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GreenX Metals and Future 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 Future Metals NL are associated (or correlated) with GreenX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GreenX Metals has no effect on the direction of Future Metals i.e., Future Metals and GreenX Metals go up and down completely randomly.

Pair Corralation between Future Metals and GreenX Metals

Assuming the 90 days trading horizon Future Metals NL is expected to generate 0.59 times more return on investment than GreenX Metals. However, Future Metals NL is 1.7 times less risky than GreenX Metals. It trades about 0.04 of its potential returns per unit of risk. GreenX Metals is currently generating about 0.01 per unit of risk. If you would invest  90.00  in Future Metals NL on September 2, 2024 and sell it today you would earn a total of  5.00  from holding Future Metals NL or generate 5.56% return on investment over 90 days.

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

Future Metals NL  vs.  GreenX Metals

Future Metals NL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Future Metals NL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Future Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GreenX Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GreenX Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, GreenX Metals is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Future Metals and GreenX Metals

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

The idea behind Future Metals NL and GreenX 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..