Correlation Between Treasury Metals and Rover Metals

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

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

Diversification Opportunities for Treasury Metals and Rover Metals

-0.13

Correlation Coefficient

Treasury Metals  Rover Metals

Good diversification

The 3 months correlation between Treasury and Rover is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Metals and Rover Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rover Metals Corp and Treasury 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 Treasury Metals are associated (or correlated) with Rover Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rover Metals Corp has no effect on the direction of Treasury Metals i.e., Treasury Metals and Rover Metals go up and down completely randomly.

Pair Corralation between Treasury Metals and Rover Metals

Assuming the 90 days horizon Treasury Metals is expected to generate 1.43 times less return on investment than Rover Metals. But when comparing it to its historical volatility, Treasury Metals is 2.28 times less risky than Rover Metals. It trades about 0.07 of its potential returns per unit of risk. Rover Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2.69  in Rover Metals Corp on September 4, 2024 and sell it today you would lose (1.12) from holding Rover Metals Corp or give up 41.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.06%
Values	Daily Returns

Treasury Metals  vs.  Rover Metals Corp

Treasury Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Treasury Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rover Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rover Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Rover Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Metals and Rover Metals

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

The idea behind Treasury Metals and Rover Metals Corp 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.