Correlation Between Galway Metals and Altiplano Metals

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

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

Diversification Opportunities for Galway Metals and Altiplano Metals

0.68

Correlation Coefficient

Galway Metals  Altiplano Metals

Poor diversification

The 3 months correlation between Galway and Altiplano is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Galway Metals and Altiplano Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altiplano Metals and Galway 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 Galway Metals are associated (or correlated) with Altiplano Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altiplano Metals has no effect on the direction of Galway Metals i.e., Galway Metals and Altiplano Metals go up and down completely randomly.

Pair Corralation between Galway Metals and Altiplano Metals

Assuming the 90 days horizon Galway Metals is expected to generate 1.14 times more return on investment than Altiplano Metals. However, Galway Metals is 1.14 times more volatile than Altiplano Metals. It trades about 0.01 of its potential returns per unit of risk. Altiplano Metals is currently generating about -0.14 per unit of risk. If you would invest  53.00  in Galway Metals on September 3, 2024 and sell it today you would lose (4.00) from holding Galway Metals or give up 7.55% of portfolio value over 90 days.

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

Galway Metals  vs.  Altiplano Metals

Galway Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galway Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Galway Metals is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Altiplano Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Altiplano Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Galway Metals and Altiplano Metals

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

The idea behind Galway Metals and Altiplano 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.