Correlation Between Faraday Copper and Dore Copper

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

By analyzing existing cross correlation between Faraday Copper Corp and Dore Copper Mining, you can compare the effects of market volatilities on Faraday Copper and Dore Copper 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 Faraday Copper with a short position of Dore Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and Dore Copper.

Diversification Opportunities for Faraday Copper and Dore Copper

0.72

Correlation Coefficient

Faraday Copper  Dore Copper

Poor diversification

The 3 months correlation between Faraday and Dore is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Dore Copper Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dore Copper Mining and Faraday Copper 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 Faraday Copper Corp are associated (or correlated) with Dore Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dore Copper Mining has no effect on the direction of Faraday Copper i.e., Faraday Copper and Dore Copper go up and down completely randomly.

Pair Corralation between Faraday Copper and Dore Copper

Assuming the 90 days trading horizon Faraday Copper is expected to generate 9.11 times less return on investment than Dore Copper. But when comparing it to its historical volatility, Faraday Copper Corp is 4.23 times less risky than Dore Copper. It trades about 0.04 of its potential returns per unit of risk. Dore Copper Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Dore Copper Mining on September 5, 2024 and sell it today you would earn a total of  3.00  from holding Dore Copper Mining or generate 27.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Faraday Copper Corp  vs.  Dore Copper Mining

Faraday Copper Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Faraday Copper is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dore Copper Mining

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dore Copper Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal primary indicators, Dore Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faraday Copper and Dore Copper

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

The idea behind Faraday Copper Corp and Dore Copper 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.