Correlation Between First Copper and Chernan Metal

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

By analyzing existing cross correlation between First Copper Technology and Chernan Metal Industrial, you can compare the effects of market volatilities on First Copper and Chernan Metal 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 First Copper with a short position of Chernan Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Copper and Chernan Metal.

Diversification Opportunities for First Copper and Chernan Metal

0.21

Correlation Coefficient

First Copper  Chernan Metal

Modest diversification

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

Pair Corralation between First Copper and Chernan Metal

Assuming the 90 days trading horizon First Copper Technology is expected to generate 1.16 times more return on investment than Chernan Metal. However, First Copper is 1.16 times more volatile than Chernan Metal Industrial. It trades about 0.13 of its potential returns per unit of risk. Chernan Metal Industrial is currently generating about -0.03 per unit of risk. If you would invest  3,740  in First Copper Technology on December 30, 2024 and sell it today you would earn a total of  780.00  from holding First Copper Technology or generate 20.86% return on investment over 90 days.

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

First Copper Technology  vs.  Chernan Metal Industrial

First Copper Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Copper Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, First Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Chernan Metal Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chernan Metal Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chernan Metal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Copper and Chernan Metal

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

The idea behind First Copper Technology and Chernan Metal Industrial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.