Correlation Between Centaurus Metals and Australian Strategic

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

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

Diversification Opportunities for Centaurus Metals and Australian Strategic

0.62

Correlation Coefficient

Centaurus Metals  Australian Strategic

Poor diversification

The 3 months correlation between Centaurus and Australian is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Centaurus Metals Limited and Australian Strategic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Strategic and Centaurus 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 Centaurus Metals Limited are associated (or correlated) with Australian Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Strategic has no effect on the direction of Centaurus Metals i.e., Centaurus Metals and Australian Strategic go up and down completely randomly.

Pair Corralation between Centaurus Metals and Australian Strategic

Assuming the 90 days horizon Centaurus Metals is expected to generate 2.6 times less return on investment than Australian Strategic. In addition to that, Centaurus Metals is 1.05 times more volatile than Australian Strategic Materials. It trades about 0.01 of its total potential returns per unit of risk. Australian Strategic Materials is currently generating about 0.03 per unit of volatility. If you would invest  33.00  in Australian Strategic Materials on September 13, 2024 and sell it today you would earn a total of  1.00  from holding Australian Strategic Materials or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Centaurus Metals Limited  vs.  Australian Strategic Materials

Centaurus Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Australian Strategic

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Strategic Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Australian Strategic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centaurus Metals and Australian Strategic

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

The idea behind Centaurus Metals Limited and Australian Strategic Materials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.