Correlation Between Focus Graphite and Clime Investment

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

By analyzing existing cross correlation between Focus Graphite and Clime Investment Management, you can compare the effects of market volatilities on Focus Graphite and Clime Investment 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 Clime Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Graphite and Clime Investment.

Diversification Opportunities for Focus Graphite and Clime Investment

0.65

Correlation Coefficient

Focus Graphite  Clime Investment

Poor diversification

The 3 months correlation between Focus and Clime is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Clime Investment Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clime Investment Man 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 Clime Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clime Investment Man has no effect on the direction of Focus Graphite i.e., Focus Graphite and Clime Investment go up and down completely randomly.

Pair Corralation between Focus Graphite and Clime Investment

Assuming the 90 days horizon Focus Graphite is expected to generate 361.86 times less return on investment than Clime Investment. But when comparing it to its historical volatility, Focus Graphite is 18.67 times less risky than Clime Investment. It trades about 0.01 of its potential returns per unit of risk. Clime Investment Management is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Clime Investment Management on December 25, 2024 and sell it today you would earn a total of  0.09  from holding Clime Investment Management or generate 900.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.65%
Values	Daily Returns

Focus Graphite  vs.  Clime Investment Management

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.

Clime Investment Man

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Clime Investment Management are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Clime Investment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Graphite and Clime Investment

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

The idea behind Focus Graphite and Clime Investment Management 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.