Correlation Between EMX Royalty and Fortescue Metals

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

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

Diversification Opportunities for EMX Royalty and Fortescue Metals

0.64

Correlation Coefficient

EMX Royalty  Fortescue Metals

Poor diversification

The 3 months correlation between EMX and Fortescue is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding EMX Royalty Corp and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and EMX Royalty 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 EMX Royalty Corp are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of EMX Royalty i.e., EMX Royalty and Fortescue Metals go up and down completely randomly.

Pair Corralation between EMX Royalty and Fortescue Metals

Considering the 90-day investment horizon EMX Royalty Corp is expected to generate 0.62 times more return on investment than Fortescue Metals. However, EMX Royalty Corp is 1.62 times less risky than Fortescue Metals. It trades about 0.03 of its potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.01 per unit of risk. If you would invest  157.00  in EMX Royalty Corp on October 7, 2024 and sell it today you would earn a total of  17.00  from holding EMX Royalty Corp or generate 10.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

EMX Royalty Corp  vs.  Fortescue Metals Group

EMX Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMX Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, EMX Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fortescue Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EMX Royalty and Fortescue Metals

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

The idea behind EMX Royalty Corp and Fortescue Metals Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.