Correlation Between Metal Sky and New Generation

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

By analyzing existing cross correlation between Metal Sky Star and New Generation Consumer, you can compare the effects of market volatilities on Metal Sky and New Generation 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 Metal Sky with a short position of New Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metal Sky and New Generation.

Diversification Opportunities for Metal Sky and New Generation

-0.37

Correlation Coefficient

Metal Sky  New Generation

Very good diversification

The 3 months correlation between Metal and New is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Metal Sky Star and New Generation Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Generation Consumer and Metal Sky 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 Metal Sky Star are associated (or correlated) with New Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Generation Consumer has no effect on the direction of Metal Sky i.e., Metal Sky and New Generation go up and down completely randomly.

Pair Corralation between Metal Sky and New Generation

Assuming the 90 days horizon Metal Sky is expected to generate 15.1 times less return on investment than New Generation. But when comparing it to its historical volatility, Metal Sky Star is 18.76 times less risky than New Generation. It trades about 0.07 of its potential returns per unit of risk. New Generation Consumer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.07  in New Generation Consumer on September 18, 2024 and sell it today you would lose (0.01) from holding New Generation Consumer or give up 14.29% of portfolio value over 90 days.

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

Metal Sky Star  vs.  New Generation Consumer

Metal Sky Star

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Metal Sky Star are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Metal Sky is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

New Generation Consumer

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Metal Sky and New Generation

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

The idea behind Metal Sky Star and New Generation Consumer 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.