Correlation Between Focus Graphite and Red Pine

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

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

Diversification Opportunities for Focus Graphite and Red Pine

0.32

Correlation Coefficient

Focus Graphite  Red Pine

Weak diversification

The 3 months correlation between Focus and Red is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Red Pine Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Pine Exploration 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 Red Pine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Pine Exploration has no effect on the direction of Focus Graphite i.e., Focus Graphite and Red Pine go up and down completely randomly.

Pair Corralation between Focus Graphite and Red Pine

Assuming the 90 days horizon Focus Graphite is expected to under-perform the Red Pine. In addition to that, Focus Graphite is 3.51 times more volatile than Red Pine Exploration. It trades about -0.04 of its total potential returns per unit of risk. Red Pine Exploration is currently generating about 0.02 per unit of volatility. If you would invest  8.60  in Red Pine Exploration on October 6, 2024 and sell it today you would earn a total of  0.01  from holding Red Pine Exploration or generate 0.12% return on investment over 90 days.

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

Focus Graphite  vs.  Red Pine Exploration

Focus Graphite

Risk-Adjusted Performance

1 of 100

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 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Red Pine Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Pine Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Focus Graphite and Red Pine

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

The idea behind Focus Graphite and Red Pine Exploration 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.