Correlation Between Norra Metals and Australian Mines

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

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

Diversification Opportunities for Norra Metals and Australian Mines

0.0

Correlation Coefficient

Norra Metals  Australian Mines

Pay attention - limited upside

The 3 months correlation between Norra and Australian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Norra Metals Corp and Australian Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Mines and Norra 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 Norra Metals Corp are associated (or correlated) with Australian Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Mines has no effect on the direction of Norra Metals i.e., Norra Metals and Australian Mines go up and down completely randomly.

Pair Corralation between Norra Metals and Australian Mines

If you would invest  1.65  in Australian Mines Limited on March 5, 2024 and sell it today you would lose (0.64) from holding Australian Mines Limited or give up 38.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Norra Metals Corp  vs.  Australian Mines Limited

Norra Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Norra Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Norra Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Australian Mines

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Norra Metals and Australian Mines

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

The idea behind Norra Metals Corp and Australian Mines Limited 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.