Correlation Between Foraco International and Fireweed Zinc

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

By analyzing existing cross correlation between Foraco International SA and Fireweed Zinc, you can compare the effects of market volatilities on Foraco International and Fireweed Zinc 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 Foraco International with a short position of Fireweed Zinc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foraco International and Fireweed Zinc.

Diversification Opportunities for Foraco International and Fireweed Zinc

-0.37

Correlation Coefficient

Foraco International  Fireweed Zinc

Very good diversification

The 3 months correlation between Foraco and Fireweed is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Foraco International SA and Fireweed Zinc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fireweed Zinc and Foraco International 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 Foraco International SA are associated (or correlated) with Fireweed Zinc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fireweed Zinc has no effect on the direction of Foraco International i.e., Foraco International and Fireweed Zinc go up and down completely randomly.

Pair Corralation between Foraco International and Fireweed Zinc

Assuming the 90 days trading horizon Foraco International SA is expected to under-perform the Fireweed Zinc. In addition to that, Foraco International is 1.34 times more volatile than Fireweed Zinc. It trades about -0.16 of its total potential returns per unit of risk. Fireweed Zinc is currently generating about 0.11 per unit of volatility. If you would invest  147.00  in Fireweed Zinc on December 4, 2024 and sell it today you would earn a total of  11.00  from holding Fireweed Zinc or generate 7.48% return on investment over 90 days.

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

Foraco International SA  vs.  Fireweed Zinc

Foraco International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Foraco International SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Fireweed Zinc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fireweed Zinc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Fireweed Zinc showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Foraco International and Fireweed Zinc

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

The idea behind Foraco International SA and Fireweed Zinc 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.