Correlation Between Champion Bear and Adriatic Metals

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

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

Diversification Opportunities for Champion Bear and Adriatic Metals

0.6

Correlation Coefficient

Champion Bear  Adriatic Metals

Poor diversification

The 3 months correlation between Champion and Adriatic is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Champion Bear Resources and Adriatic Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriatic Metals PLC and Champion Bear 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 Champion Bear Resources are associated (or correlated) with Adriatic Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriatic Metals PLC has no effect on the direction of Champion Bear i.e., Champion Bear and Adriatic Metals go up and down completely randomly.

Pair Corralation between Champion Bear and Adriatic Metals

Assuming the 90 days horizon Champion Bear Resources is expected to generate 8.74 times more return on investment than Adriatic Metals. However, Champion Bear is 8.74 times more volatile than Adriatic Metals PLC. It trades about 0.06 of its potential returns per unit of risk. Adriatic Metals PLC is currently generating about 0.01 per unit of risk. If you would invest  5.00  in Champion Bear Resources on September 26, 2024 and sell it today you would lose (2.00) from holding Champion Bear Resources or give up 40.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

Champion Bear Resources  vs.  Adriatic Metals PLC

Champion Bear Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Champion Bear Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Champion Bear reported solid returns over the last few months and may actually be approaching a breakup point.

Adriatic Metals PLC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adriatic Metals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Adriatic Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Champion Bear and Adriatic Metals

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

The idea behind Champion Bear Resources and Adriatic Metals PLC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.