Correlation Between Copper Fox and Highland Copper

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

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

Diversification Opportunities for Copper Fox and Highland Copper

0.4

Correlation Coefficient

Copper Fox  Highland Copper

Very weak diversification

The 3 months correlation between Copper and Highland is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Copper Fox Metals and Highland Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Copper and Copper Fox 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 Copper Fox Metals are associated (or correlated) with Highland Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Copper has no effect on the direction of Copper Fox i.e., Copper Fox and Highland Copper go up and down completely randomly.

Pair Corralation between Copper Fox and Highland Copper

Assuming the 90 days horizon Copper Fox Metals is expected to generate 1.09 times more return on investment than Highland Copper. However, Copper Fox is 1.09 times more volatile than Highland Copper. It trades about 0.05 of its potential returns per unit of risk. Highland Copper is currently generating about 0.04 per unit of risk. If you would invest  11.00  in Copper Fox Metals on September 20, 2024 and sell it today you would earn a total of  8.00  from holding Copper Fox Metals or generate 72.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Copper Fox Metals  vs.  Highland Copper

Copper Fox Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Copper Fox and Highland Copper

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

The idea behind Copper Fox Metals and Highland Copper 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.