Correlation Between Pinnacle Investment and Metro Mining

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

By analyzing existing cross correlation between Pinnacle Investment Management and Metro Mining, you can compare the effects of market volatilities on Pinnacle Investment and Metro Mining 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 Pinnacle Investment with a short position of Metro Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Investment and Metro Mining.

Diversification Opportunities for Pinnacle Investment and Metro Mining

0.87

Correlation Coefficient

Pinnacle Investment  Metro Mining

Very poor diversification

The 3 months correlation between Pinnacle and Metro is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Investment Management and Metro Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Mining and Pinnacle Investment 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 Pinnacle Investment Management are associated (or correlated) with Metro Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Mining has no effect on the direction of Pinnacle Investment i.e., Pinnacle Investment and Metro Mining go up and down completely randomly.

Pair Corralation between Pinnacle Investment and Metro Mining

Assuming the 90 days trading horizon Pinnacle Investment is expected to generate 1.25 times less return on investment than Metro Mining. But when comparing it to its historical volatility, Pinnacle Investment Management is 1.7 times less risky than Metro Mining. It trades about 0.26 of its potential returns per unit of risk. Metro Mining is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3.90  in Metro Mining on September 19, 2024 and sell it today you would earn a total of  1.80  from holding Metro Mining or generate 46.15% return on investment over 90 days.

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

Pinnacle Investment Management  vs.  Metro Mining

Pinnacle Investment

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Investment Management are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Pinnacle Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Metro Mining

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Metro Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pinnacle Investment and Metro Mining

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

The idea behind Pinnacle Investment Management and Metro Mining 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.