Correlation Between Metro Mining and Collins Foods
Can any of the company-specific risk be diversified away by investing in both Metro Mining and Collins Foods 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 Metro Mining and Collins Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Metro Mining and Collins Foods, you can compare the effects of market volatilities on Metro Mining and Collins Foods 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 Metro Mining with a short position of Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metro Mining and Collins Foods.
Diversification Opportunities for Metro Mining and Collins Foods
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Metro and Collins is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Metro Mining and Collins Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods and Metro Mining 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 Metro Mining are associated (or correlated) with Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods has no effect on the direction of Metro Mining i.e., Metro Mining and Collins Foods go up and down completely randomly.
Pair Corralation between Metro Mining and Collins Foods
Assuming the 90 days trading horizon Metro Mining is expected to generate 2.45 times more return on investment than Collins Foods. However, Metro Mining is 2.45 times more volatile than Collins Foods. It trades about 0.17 of its potential returns per unit of risk. Collins Foods is currently generating about -0.17 per unit of risk. If you would invest 4.00 in Metro Mining on September 26, 2024 and sell it today you would earn a total of 1.50 from holding Metro Mining or generate 37.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Metro Mining vs. Collins Foods
Performance |
Timeline |
Metro Mining |
Collins Foods |
Metro Mining and Collins Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Metro Mining and Collins Foods
The main advantage of trading using opposite Metro Mining and Collins Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Mining position performs unexpectedly, Collins Foods 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 Collins Foods will offset losses from the drop in Collins Foods' long position.Metro Mining vs. Northern Star Resources | Metro Mining vs. Evolution Mining | Metro Mining vs. Bluescope Steel | Metro Mining vs. Aneka Tambang Tbk |
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Check out your portfolio center.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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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