Correlation Between Mount Gibson and Emetals

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

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

Diversification Opportunities for Mount Gibson and Emetals

-0.35

Correlation Coefficient

Mount Gibson  Emetals

Very good diversification

The 3 months correlation between Mount and Emetals is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Emetals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emetals and Mount Gibson 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 Mount Gibson Iron are associated (or correlated) with Emetals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emetals has no effect on the direction of Mount Gibson i.e., Mount Gibson and Emetals go up and down completely randomly.

Pair Corralation between Mount Gibson and Emetals

Assuming the 90 days trading horizon Mount Gibson Iron is expected to under-perform the Emetals. But the stock apears to be less risky and, when comparing its historical volatility, Mount Gibson Iron is 2.31 times less risky than Emetals. The stock trades about -0.04 of its potential returns per unit of risk. The Emetals is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Emetals on September 26, 2024 and sell it today you would lose (0.40) from holding Emetals or give up 50.0% of portfolio value over 90 days.

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

Mount Gibson Iron  vs.  Emetals

Mount Gibson Iron

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mount Gibson Iron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mount Gibson is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Mount Gibson and Emetals

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

The idea behind Mount Gibson Iron and Emetals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.