Correlation Between Three Valley and World Copper

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

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

Diversification Opportunities for Three Valley and World Copper

0.07

Correlation Coefficient

Three Valley  World Copper

Significant diversification

The 3 months correlation between Three and World is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Three Valley Copper and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper and Three Valley 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 Three Valley Copper are associated (or correlated) with World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of Three Valley i.e., Three Valley and World Copper go up and down completely randomly.

Pair Corralation between Three Valley and World Copper

Assuming the 90 days horizon Three Valley Copper is expected to generate 33.98 times more return on investment than World Copper. However, Three Valley is 33.98 times more volatile than World Copper. It trades about 0.24 of its potential returns per unit of risk. World Copper is currently generating about 0.01 per unit of risk. If you would invest  0.01  in Three Valley Copper on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Three Valley Copper or generate 0.0% return on investment over 90 days.

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

Three Valley Copper  vs.  World Copper

Three Valley Copper

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Three Valley Copper are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Three Valley reported solid returns over the last few months and may actually be approaching a breakup point.

World Copper

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Copper are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, World Copper is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Three Valley and World Copper

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

The idea behind Three Valley Copper and World Copper 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.