Correlation Between De Grey and FireFly Metals

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

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

Diversification Opportunities for De Grey and FireFly Metals

-0.46

Correlation Coefficient

De Grey  FireFly Metals

Very good diversification

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

Pair Corralation between De Grey and FireFly Metals

Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.2 times more return on investment than FireFly Metals. However, De Grey is 1.2 times more volatile than FireFly Metals. It trades about 0.15 of its potential returns per unit of risk. FireFly Metals is currently generating about -0.19 per unit of risk. If you would invest  140.00  in De Grey Mining on October 9, 2024 and sell it today you would earn a total of  43.00  from holding De Grey Mining or generate 30.71% return on investment over 90 days.

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

De Grey Mining  vs.  FireFly Metals

De Grey Mining

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

FireFly Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FireFly Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with De Grey and FireFly Metals

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

The idea behind De Grey Mining and FireFly 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.

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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.