Correlation Between Faraday Copper and North Arrow

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

Diversification Opportunities for Faraday Copper and North Arrow

-0.51

Correlation Coefficient

Faraday Copper  North Arrow

Excellent diversification

The 3 months correlation between Faraday and North is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and North Arrow Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Arrow Minerals 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 North Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Arrow Minerals has no effect on the direction of Faraday Copper i.e., Faraday Copper and North Arrow go up and down completely randomly.

Pair Corralation between Faraday Copper and North Arrow

Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 0.48 times more return on investment than North Arrow. However, Faraday Copper Corp is 2.06 times less risky than North Arrow. It trades about 0.0 of its potential returns per unit of risk. North Arrow Minerals is currently generating about -0.06 per unit of risk. If you would invest  80.00  in Faraday Copper Corp on December 1, 2024 and sell it today you would lose (1.00) from holding Faraday Copper Corp or give up 1.25% of portfolio value over 90 days.

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

Faraday Copper Corp  vs.  North Arrow Minerals

Faraday Copper Corp

Risk-Adjusted Performance

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 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.

North Arrow Minerals

Risk-Adjusted Performance

Very Weak

Over the last 90 days North Arrow Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Faraday Copper and North Arrow

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

The idea behind Faraday Copper Corp and North Arrow Minerals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.