Correlation Between Focus Graphite and Flying Nickel

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

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

Diversification Opportunities for Focus Graphite and Flying Nickel

-0.22

Correlation Coefficient

Focus Graphite  Flying Nickel

Very good diversification

The 3 months correlation between Focus and Flying is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Flying Nickel Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flying Nickel Mining and Focus Graphite 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 Focus Graphite are associated (or correlated) with Flying Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flying Nickel Mining has no effect on the direction of Focus Graphite i.e., Focus Graphite and Flying Nickel go up and down completely randomly.

Pair Corralation between Focus Graphite and Flying Nickel

Assuming the 90 days horizon Focus Graphite is expected to generate 47.63 times less return on investment than Flying Nickel. But when comparing it to its historical volatility, Focus Graphite is 1.91 times less risky than Flying Nickel. It trades about 0.01 of its potential returns per unit of risk. Flying Nickel Mining is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1.60  in Flying Nickel Mining on December 26, 2024 and sell it today you would earn a total of  1.06  from holding Flying Nickel Mining or generate 66.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	33.33%
Values	Daily Returns

Focus Graphite  vs.  Flying Nickel Mining

Focus Graphite

Risk-Adjusted Performance

Very Weak

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

Flying Nickel Mining

Risk-Adjusted Performance

Solid

Over the last 90 days Flying Nickel Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Flying Nickel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Graphite and Flying Nickel

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

The idea behind Focus Graphite and Flying Nickel Mining 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.