Correlation Between Neometals and Metals Exploration

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

By analyzing existing cross correlation between Neometals and Metals Exploration Plc, you can compare the effects of market volatilities on Neometals and Metals Exploration 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 Metals Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neometals and Metals Exploration.

Diversification Opportunities for Neometals and Metals Exploration

-0.21

Correlation Coefficient

Neometals  Metals Exploration

Very good diversification

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

Pair Corralation between Neometals and Metals Exploration

Assuming the 90 days trading horizon Neometals is expected to generate 1.25 times more return on investment than Metals Exploration. However, Neometals is 1.25 times more volatile than Metals Exploration Plc. It trades about 0.04 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.02 per unit of risk. If you would invest  400.00  in Neometals on September 13, 2024 and sell it today you would earn a total of  25.00  from holding Neometals or generate 6.25% return on investment over 90 days.

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

Neometals  vs.  Metals Exploration Plc

Neometals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neometals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Neometals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Metals Exploration Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Exploration Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Neometals and Metals Exploration

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

The idea behind Neometals and Metals Exploration Plc 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.