Correlation Between Global Energy and Mineral Res

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

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

Diversification Opportunities for Global Energy and Mineral Res

0.19

Correlation Coefficient

Global Energy  Mineral Res

Average diversification

The 3 months correlation between Global and Mineral is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Global Energy Metals and Mineral Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Res and Global Energy 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 Global Energy Metals are associated (or correlated) with Mineral Res. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Res has no effect on the direction of Global Energy i.e., Global Energy and Mineral Res go up and down completely randomly.

Pair Corralation between Global Energy and Mineral Res

Assuming the 90 days horizon Global Energy Metals is expected to generate 1.88 times more return on investment than Mineral Res. However, Global Energy is 1.88 times more volatile than Mineral Res. It trades about 0.06 of its potential returns per unit of risk. Mineral Res is currently generating about 0.0 per unit of risk. If you would invest  1.42  in Global Energy Metals on September 15, 2024 and sell it today you would earn a total of  0.16  from holding Global Energy Metals or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Global Energy Metals  vs.  Mineral Res

Global Energy Metals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global Energy Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Mineral Res

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Res has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mineral Res is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Energy and Mineral Res

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

The idea behind Global Energy Metals and Mineral Res 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.