Correlation Between Faraday Copper and Imperial Metals

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

Diversification Opportunities for Faraday Copper and Imperial Metals

0.64

Correlation Coefficient

Faraday Copper  Imperial Metals

Poor diversification

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

Pair Corralation between Faraday Copper and Imperial Metals

Assuming the 90 days trading horizon Faraday Copper Corp is expected to under-perform the Imperial Metals. But the stock apears to be less risky and, when comparing its historical volatility, Faraday Copper Corp is 1.35 times less risky than Imperial Metals. The stock trades about -0.13 of its potential returns per unit of risk. The Imperial Metals is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  224.00  in Imperial Metals on October 6, 2024 and sell it today you would lose (33.00) from holding Imperial Metals or give up 14.73% of portfolio value over 90 days.

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

Faraday Copper Corp  vs.  Imperial Metals

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.

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward 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 Imperial Metals

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

The idea behind Faraday Copper Corp and Imperial Metals 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.