Correlation Between Focus Graphite and Sterling Metals

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

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

Diversification Opportunities for Focus Graphite and Sterling Metals

0.31

Correlation Coefficient

Focus Graphite  Sterling Metals

Weak diversification

The 3 months correlation between Focus and Sterling is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Sterling Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Metals Corp 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 Sterling Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Metals Corp has no effect on the direction of Focus Graphite i.e., Focus Graphite and Sterling Metals go up and down completely randomly.

Pair Corralation between Focus Graphite and Sterling Metals

Assuming the 90 days horizon Focus Graphite is expected to under-perform the Sterling Metals. But the otc stock apears to be less risky and, when comparing its historical volatility, Focus Graphite is 1.86 times less risky than Sterling Metals. The otc stock trades about -0.01 of its potential returns per unit of risk. The Sterling Metals Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.30  in Sterling Metals Corp on September 12, 2024 and sell it today you would lose (3.17) from holding Sterling Metals Corp or give up 59.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.72%
Values	Daily Returns

Focus Graphite  vs.  Sterling Metals Corp

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 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.

Sterling Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sterling Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Focus Graphite and Sterling Metals

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

The idea behind Focus Graphite and Sterling Metals Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.