Correlation Between Highway 50 and Transition Metals

Can any of the company-specific risk be diversified away by investing in both Highway 50 and Transition 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 Highway 50 and Transition Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highway 50 Gold and Transition Metals Corp, you can compare the effects of market volatilities on Highway 50 and Transition 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 Highway 50 with a short position of Transition Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway 50 and Transition Metals.

Diversification Opportunities for Highway 50 and Transition Metals

0.78

Correlation Coefficient

Highway 50  Transition Metals

Poor diversification

The 3 months correlation between Highway and Transition is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Highway 50 Gold and Transition Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transition Metals Corp and Highway 50 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 Highway 50 Gold are associated (or correlated) with Transition Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transition Metals Corp has no effect on the direction of Highway 50 i.e., Highway 50 and Transition Metals go up and down completely randomly.

Pair Corralation between Highway 50 and Transition Metals

Assuming the 90 days horizon Highway 50 Gold is expected to under-perform the Transition Metals. But the stock apears to be less risky and, when comparing its historical volatility, Highway 50 Gold is 1.02 times less risky than Transition Metals. The stock trades about -0.11 of its potential returns per unit of risk. The Transition Metals Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  6.50  in Transition Metals Corp on September 23, 2024 and sell it today you would lose (1.50) from holding Transition Metals Corp or give up 23.08% of portfolio value over 90 days.

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

Highway 50 Gold  vs.  Transition Metals Corp

Highway 50 Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highway 50 Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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.

Transition Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Highway 50 and Transition Metals

The main advantage of trading using opposite Highway 50 and Transition Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway 50 position performs unexpectedly, Transition 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 Transition Metals will offset losses from the drop in Transition Metals' long position.

The idea behind Highway 50 Gold and Transition Metals Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.