Correlation Between Central Asia and Empire Metals

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

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

Diversification Opportunities for Central Asia and Empire Metals

0.63

Correlation Coefficient

Central Asia  Empire Metals

Poor diversification

The 3 months correlation between Central and Empire is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Central Asia 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 Central Asia Metals are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Central Asia i.e., Central Asia and Empire Metals go up and down completely randomly.

Pair Corralation between Central Asia and Empire Metals

Assuming the 90 days trading horizon Central Asia Metals is expected to generate 0.65 times more return on investment than Empire Metals. However, Central Asia Metals is 1.53 times less risky than Empire Metals. It trades about -0.04 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.1 per unit of risk. If you would invest  19,980  in Central Asia Metals on June 18, 2024 and sell it today you would lose (1,180) from holding Central Asia Metals or give up 5.91% of portfolio value over 90 days.

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

Central Asia Metals  vs.  Empire Metals Limited

Central Asia Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Asia Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Asia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in October 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Central Asia and Empire Metals

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

The idea behind Central Asia Metals and Empire Metals 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.