Correlation Between Faraday Copper and Geodrill

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

Diversification Opportunities for Faraday Copper and Geodrill

-0.64

Correlation Coefficient

Faraday Copper  Geodrill

Excellent diversification

The 3 months correlation between Faraday and Geodrill is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited 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 Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of Faraday Copper i.e., Faraday Copper and Geodrill go up and down completely randomly.

Pair Corralation between Faraday Copper and Geodrill

Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 1.26 times more return on investment than Geodrill. However, Faraday Copper is 1.26 times more volatile than Geodrill Limited. It trades about 0.13 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.0 per unit of risk. If you would invest  76.00  in Faraday Copper Corp on December 24, 2024 and sell it today you would earn a total of  14.00  from holding Faraday Copper Corp or generate 18.42% return on investment over 90 days.

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

Faraday Copper Corp  vs.  Geodrill Limited

Faraday Copper Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Faraday Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Geodrill Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geodrill Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Geodrill is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Faraday Copper and Geodrill

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

The idea behind Faraday Copper Corp and Geodrill Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.