Correlation Between Neometals and Aberforth Smaller

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

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

Diversification Opportunities for Neometals and Aberforth Smaller

0.21

Correlation Coefficient

Neometals  Aberforth Smaller

Modest diversification

The 3 months correlation between Neometals and Aberforth is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Neometals and Aberforth Smaller Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberforth Smaller and Neometals 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 Neometals are associated (or correlated) with Aberforth Smaller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberforth Smaller has no effect on the direction of Neometals i.e., Neometals and Aberforth Smaller go up and down completely randomly.

Pair Corralation between Neometals and Aberforth Smaller

Assuming the 90 days trading horizon Neometals is expected to generate 4.05 times more return on investment than Aberforth Smaller. However, Neometals is 4.05 times more volatile than Aberforth Smaller Companies. It trades about 0.0 of its potential returns per unit of risk. Aberforth Smaller Companies is currently generating about -0.1 per unit of risk. If you would invest  450.00  in Neometals on September 14, 2024 and sell it today you would lose (25.00) from holding Neometals or give up 5.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Neometals  vs.  Aberforth Smaller Companies

Neometals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neometals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Neometals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aberforth Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberforth Smaller Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Neometals and Aberforth Smaller

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

The idea behind Neometals and Aberforth Smaller Companies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.