Correlation Between South Pacific and Tincorp Metals

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

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

Diversification Opportunities for South Pacific and Tincorp Metals

0.46

Correlation Coefficient

South Pacific  Tincorp Metals

Very weak diversification

The 3 months correlation between South and Tincorp is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding South Pacific Metals and Tincorp Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tincorp Metals and South Pacific 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 South Pacific Metals are associated (or correlated) with Tincorp Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tincorp Metals has no effect on the direction of South Pacific i.e., South Pacific and Tincorp Metals go up and down completely randomly.

Pair Corralation between South Pacific and Tincorp Metals

Assuming the 90 days trading horizon South Pacific Metals is expected to generate 1.36 times more return on investment than Tincorp Metals. However, South Pacific is 1.36 times more volatile than Tincorp Metals. It trades about 0.04 of its potential returns per unit of risk. Tincorp Metals is currently generating about 0.0 per unit of risk. If you would invest  50.00  in South Pacific Metals on March 4, 2025 and sell it today you would lose (4.00) from holding South Pacific Metals or give up 8.0% of portfolio value over 90 days.

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

South Pacific Metals  vs.  Tincorp Metals

South Pacific Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in South Pacific Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable primary indicators, South Pacific is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Tincorp Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tincorp Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Tincorp Metals is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with South Pacific and Tincorp Metals

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

The idea behind South Pacific Metals and Tincorp Metals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.