Correlation Between Focus Graphite and Magna Mining

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

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

Diversification Opportunities for Focus Graphite and Magna Mining

-0.57

Correlation Coefficient

Focus Graphite  Magna Mining

Excellent diversification

The 3 months correlation between Focus and Magna is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Magna Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna 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 Magna Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna Mining has no effect on the direction of Focus Graphite i.e., Focus Graphite and Magna Mining go up and down completely randomly.

Pair Corralation between Focus Graphite and Magna Mining

Assuming the 90 days horizon Focus Graphite is expected to generate 3.18 times less return on investment than Magna Mining. In addition to that, Focus Graphite is 2.25 times more volatile than Magna Mining. It trades about 0.02 of its total potential returns per unit of risk. Magna Mining is currently generating about 0.17 per unit of volatility. If you would invest  77.00  in Magna Mining on September 12, 2024 and sell it today you would earn a total of  36.00  from holding Magna Mining or generate 46.75% return on investment over 90 days.

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

Focus Graphite  vs.  Magna Mining

Focus Graphite

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Magna Mining

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Focus Graphite and Magna Mining

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

The idea behind Focus Graphite and Magna 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.