Correlation Between Faraday Copper and Royal Road

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

Diversification Opportunities for Faraday Copper and Royal Road

-0.37

Correlation Coefficient

Faraday Copper  Royal Road

Very good diversification

The 3 months correlation between Faraday and Royal is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Royal Road Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Road 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 Royal Road. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Road Minerals has no effect on the direction of Faraday Copper i.e., Faraday Copper and Royal Road go up and down completely randomly.

Pair Corralation between Faraday Copper and Royal Road

Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 0.35 times more return on investment than Royal Road. However, Faraday Copper Corp is 2.84 times less risky than Royal Road. It trades about -0.23 of its potential returns per unit of risk. Royal Road Minerals is currently generating about -0.1 per unit of risk. If you would invest  90.00  in Faraday Copper Corp on September 4, 2024 and sell it today you would lose (10.00) from holding Faraday Copper Corp or give up 11.11% of portfolio value over 90 days.

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

Faraday Copper Corp  vs.  Royal Road Minerals

Faraday Copper Corp

Risk-Adjusted Performance

3 of 100

Modest

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 weak basic indicators, Faraday Copper may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Royal Road Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Royal Road Minerals 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 fairly stable which may send shares a bit higher in January 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 Royal Road

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

The idea behind Faraday Copper Corp and Royal Road 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.