Correlation Between Aura Minerals and Eastern Platinum

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

By analyzing existing cross correlation between Aura Minerals and Eastern Platinum Limited, you can compare the effects of market volatilities on Aura Minerals and Eastern Platinum 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 Aura Minerals with a short position of Eastern Platinum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aura Minerals and Eastern Platinum.

Diversification Opportunities for Aura Minerals and Eastern Platinum

0.02

Correlation Coefficient

Aura Minerals  Eastern Platinum

Significant diversification

The 3 months correlation between Aura and Eastern is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Aura Minerals and Eastern Platinum Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Platinum and Aura Minerals 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 Aura Minerals are associated (or correlated) with Eastern Platinum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Platinum has no effect on the direction of Aura Minerals i.e., Aura Minerals and Eastern Platinum go up and down completely randomly.

Pair Corralation between Aura Minerals and Eastern Platinum

Assuming the 90 days trading horizon Aura Minerals is expected to generate 0.4 times more return on investment than Eastern Platinum. However, Aura Minerals is 2.47 times less risky than Eastern Platinum. It trades about 0.15 of its potential returns per unit of risk. Eastern Platinum Limited is currently generating about -0.02 per unit of risk. If you would invest  1,537  in Aura Minerals on September 13, 2024 and sell it today you would earn a total of  341.00  from holding Aura Minerals or generate 22.19% return on investment over 90 days.

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

Aura Minerals  vs.  Eastern Platinum Limited

Aura Minerals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aura Minerals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aura Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Eastern Platinum

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Eastern Platinum Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Aura Minerals and Eastern Platinum

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

The idea behind Aura Minerals and Eastern Platinum Limited 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.