Correlation Between Focus Graphite and Ridgestone Mining

Can any of the company-specific risk be diversified away by investing in both Focus Graphite and Ridgestone 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 Ridgestone 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 Ridgestone Mining, you can compare the effects of market volatilities on Focus Graphite and Ridgestone 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 Ridgestone Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Graphite and Ridgestone Mining.

Diversification Opportunities for Focus Graphite and Ridgestone Mining

0.67

Correlation Coefficient

Focus Graphite  Ridgestone Mining

Poor diversification

The 3 months correlation between Focus and Ridgestone is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Ridgestone Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ridgestone 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 Ridgestone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ridgestone Mining has no effect on the direction of Focus Graphite i.e., Focus Graphite and Ridgestone Mining go up and down completely randomly.

Pair Corralation between Focus Graphite and Ridgestone Mining

Assuming the 90 days horizon Focus Graphite is expected to under-perform the Ridgestone Mining. But the otc stock apears to be less risky and, when comparing its historical volatility, Focus Graphite is 1.21 times less risky than Ridgestone Mining. The otc stock trades about -0.04 of its potential returns per unit of risk. The Ridgestone Mining is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Ridgestone Mining on September 3, 2024 and sell it today you would lose (1.55) from holding Ridgestone Mining or give up 22.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Focus Graphite  vs.  Ridgestone Mining

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ridgestone Mining

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Focus Graphite and Ridgestone Mining

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

The idea behind Focus Graphite and Ridgestone 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.