Correlation Between Defense Metals and Metals Creek

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

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

Diversification Opportunities for Defense Metals and Metals Creek

0.21

Correlation Coefficient

Defense Metals  Metals Creek

Modest diversification

The 3 months correlation between Defense and Metals is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Defense Metals Corp and Metals Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Creek Resources and Defense 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 Defense Metals Corp are associated (or correlated) with Metals Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Creek Resources has no effect on the direction of Defense Metals i.e., Defense Metals and Metals Creek go up and down completely randomly.

Pair Corralation between Defense Metals and Metals Creek

Assuming the 90 days horizon Defense Metals is expected to generate 3.75 times less return on investment than Metals Creek. But when comparing it to its historical volatility, Defense Metals Corp is 4.11 times less risky than Metals Creek. It trades about 0.13 of its potential returns per unit of risk. Metals Creek Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Metals Creek Resources on May 13, 2025 and sell it today you would earn a total of  0.00  from holding Metals Creek Resources or generate 0.0% return on investment over 90 days.

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

Defense Metals Corp  vs.  Metals Creek Resources

Defense Metals Corp

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Defense Metals Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Defense Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Metals Creek Resources

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Metals Creek Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Metals Creek reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Defense Metals and Metals Creek

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

The idea behind Defense Metals Corp and Metals Creek Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.