Correlation Between Metals X and Data 3

Can any of the company-specific risk be diversified away by investing in both Metals X and Data 3 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 Metals X and Data 3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Metals X and Data 3, you can compare the effects of market volatilities on Metals X and Data 3 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 Metals X with a short position of Data 3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Metals X and Data 3.

Diversification Opportunities for Metals X and Data 3

0.54

Correlation Coefficient

Metals X  Data 3

Very weak diversification

The 3 months correlation between Metals and Data is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Metals X and Data 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data 3 and Metals X 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 Metals X are associated (or correlated) with Data 3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data 3 has no effect on the direction of Metals X i.e., Metals X and Data 3 go up and down completely randomly.

Pair Corralation between Metals X and Data 3

Assuming the 90 days trading horizon Metals X is expected to generate 2.08 times more return on investment than Data 3. However, Metals X is 2.08 times more volatile than Data 3. It trades about 0.15 of its potential returns per unit of risk. Data 3 is currently generating about 0.12 per unit of risk. If you would invest  50.00  in Metals X on April 22, 2025 and sell it today you would earn a total of  15.00  from holding Metals X or generate 30.0% return on investment over 90 days.

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

Metals X  vs.  Data 3

Metals X

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Metals X unveiled solid returns over the last few months and may actually be approaching a breakup point.

Data 3

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Data 3 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Data 3 may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Metals X and Data 3

The main advantage of trading using opposite Metals X and Data 3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metals X position performs unexpectedly, Data 3 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 Data 3 will offset losses from the drop in Data 3's long position.

The idea behind Metals X and Data 3 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.