Correlation Between REC Silicon and Capital Metals

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

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

Diversification Opportunities for REC Silicon and Capital Metals

0.16

Correlation Coefficient

REC Silicon  Capital Metals

Average diversification

The 3 months correlation between REC and Capital is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Capital Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Metals PLC and REC Silicon 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 REC Silicon ASA are associated (or correlated) with Capital Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Metals PLC has no effect on the direction of REC Silicon i.e., REC Silicon and Capital Metals go up and down completely randomly.

Pair Corralation between REC Silicon and Capital Metals

Assuming the 90 days trading horizon REC Silicon ASA is expected to generate 1.28 times more return on investment than Capital Metals. However, REC Silicon is 1.28 times more volatile than Capital Metals PLC. It trades about 0.1 of its potential returns per unit of risk. Capital Metals PLC is currently generating about 0.07 per unit of risk. If you would invest  176.00  in REC Silicon ASA on April 24, 2025 and sell it today you would earn a total of  53.00  from holding REC Silicon ASA or generate 30.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

REC Silicon ASA  vs.  Capital Metals PLC

REC Silicon ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in REC Silicon ASA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, REC Silicon unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capital Metals PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Metals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Capital Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REC Silicon and Capital Metals

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

The idea behind REC Silicon ASA and Capital 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..