Correlation Between Focus Graphite and Nevada Sunrise

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

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

Diversification Opportunities for Focus Graphite and Nevada Sunrise

0.13

Correlation Coefficient

Focus Graphite  Nevada Sunrise

Average diversification

The 3 months correlation between Focus and Nevada is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Nevada Sunrise Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevada Sunrise Gold 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 Nevada Sunrise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevada Sunrise Gold has no effect on the direction of Focus Graphite i.e., Focus Graphite and Nevada Sunrise go up and down completely randomly.

Pair Corralation between Focus Graphite and Nevada Sunrise

Assuming the 90 days horizon Focus Graphite is expected to generate 11.1 times less return on investment than Nevada Sunrise. But when comparing it to its historical volatility, Focus Graphite is 1.64 times less risky than Nevada Sunrise. It trades about 0.01 of its potential returns per unit of risk. Nevada Sunrise Gold is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Nevada Sunrise Gold on December 23, 2024 and sell it today you would earn a total of  0.00  from holding Nevada Sunrise Gold or generate 0.0% return on investment over 90 days.

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

Focus Graphite  vs.  Nevada Sunrise Gold

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.

Nevada Sunrise Gold

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nevada Sunrise Gold are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Nevada Sunrise reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Graphite and Nevada Sunrise

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

The idea behind Focus Graphite and Nevada Sunrise Gold 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 Global Correlations module to find global opportunities by holding instruments from different markets.