Correlation Between Faraday Copper and Generation Mining

Can any of the company-specific risk be diversified away by investing in both Faraday Copper and Generation 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 Faraday Copper and Generation Mining 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 Generation Mining, you can compare the effects of market volatilities on Faraday Copper and Generation 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 Faraday Copper with a short position of Generation Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and Generation Mining.

Diversification Opportunities for Faraday Copper and Generation Mining

0.73

Correlation Coefficient

Faraday Copper  Generation Mining

Poor diversification

The 3 months correlation between Faraday and Generation is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Generation Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation 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 Generation Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Mining has no effect on the direction of Faraday Copper i.e., Faraday Copper and Generation Mining go up and down completely randomly.

Pair Corralation between Faraday Copper and Generation Mining

Assuming the 90 days trading horizon Faraday Copper Corp is expected to under-perform the Generation Mining. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Copper Corp is 2.91 times less risky than Generation Mining. The stock trades about -0.11 of its potential returns per unit of risk. The Generation Mining is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Generation Mining on October 22, 2024 and sell it today you would earn a total of  2.00  from holding Generation Mining or generate 14.29% return on investment over 90 days.

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

Faraday Copper Corp  vs.  Generation Mining

Faraday Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Generation Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Faraday Copper and Generation Mining

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

The idea behind Faraday Copper Corp and Generation 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.