Correlation Between Focus Graphite and NGEx Minerals

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

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

Diversification Opportunities for Focus Graphite and NGEx Minerals

0.15

Correlation Coefficient

Focus Graphite  NGEx Minerals

Average diversification

The 3 months correlation between Focus and NGEx is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and NGEx Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGEx Minerals 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 NGEx Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGEx Minerals has no effect on the direction of Focus Graphite i.e., Focus Graphite and NGEx Minerals go up and down completely randomly.

Pair Corralation between Focus Graphite and NGEx Minerals

Assuming the 90 days horizon Focus Graphite is expected to generate 3.85 times more return on investment than NGEx Minerals. However, Focus Graphite is 3.85 times more volatile than NGEx Minerals. It trades about 0.01 of its potential returns per unit of risk. NGEx Minerals is currently generating about 0.01 per unit of risk. If you would invest  6.00  in Focus Graphite on December 25, 2024 and sell it today you would lose (1.00) from holding Focus Graphite or give up 16.67% of portfolio value over 90 days.

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

Focus Graphite  vs.  NGEx Minerals

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.

NGEx Minerals

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Focus Graphite and NGEx Minerals

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

The idea behind Focus Graphite and NGEx Minerals 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.