Correlation Between Focus Graphite and Latin Metals

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

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

Diversification Opportunities for Focus Graphite and Latin Metals

-0.12

Correlation Coefficient

Focus Graphite  Latin Metals

Good diversification

The 3 months correlation between Focus and Latin is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Latin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latin Metals 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 Latin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latin Metals has no effect on the direction of Focus Graphite i.e., Focus Graphite and Latin Metals go up and down completely randomly.

Pair Corralation between Focus Graphite and Latin Metals

Assuming the 90 days horizon Focus Graphite is expected to generate 48.66 times less return on investment than Latin Metals. In addition to that, Focus Graphite is 1.13 times more volatile than Latin Metals. It trades about 0.0 of its total potential returns per unit of risk. Latin Metals is currently generating about 0.04 per unit of volatility. If you would invest  6.48  in Latin Metals on September 12, 2024 and sell it today you would lose (0.08) from holding Latin Metals or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Focus Graphite  vs.  Latin Metals

Focus Graphite

Risk-Adjusted Performance

0 of 100

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.

Latin Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Latin Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Latin Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Graphite and Latin Metals

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

The idea behind Focus Graphite and Latin 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.