Correlation Between Stelar Metals and Leeuwin Metals

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

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

Diversification Opportunities for Stelar Metals and Leeuwin Metals

0.69

Correlation Coefficient

Stelar Metals  Leeuwin Metals

Poor diversification

The 3 months correlation between Stelar and Leeuwin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Stelar Metals and Leeuwin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leeuwin Metals and Stelar Metals 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 Stelar Metals are associated (or correlated) with Leeuwin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leeuwin Metals has no effect on the direction of Stelar Metals i.e., Stelar Metals and Leeuwin Metals go up and down completely randomly.

Pair Corralation between Stelar Metals and Leeuwin Metals

Assuming the 90 days trading horizon Stelar Metals is expected to under-perform the Leeuwin Metals. In addition to that, Stelar Metals is 1.91 times more volatile than Leeuwin Metals. It trades about -0.07 of its total potential returns per unit of risk. Leeuwin Metals is currently generating about -0.06 per unit of volatility. If you would invest  8.10  in Leeuwin Metals on September 4, 2024 and sell it today you would lose (0.80) from holding Leeuwin Metals or give up 9.88% of portfolio value over 90 days.

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

Stelar Metals  vs.  Leeuwin Metals

Stelar Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stelar Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Leeuwin Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leeuwin Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Stelar Metals and Leeuwin Metals

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

The idea behind Stelar Metals and Leeuwin Metals 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.