Correlation Between Faraday Copper and Teck Resources

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

Diversification Opportunities for Faraday Copper and Teck Resources

0.64

Correlation Coefficient

Faraday Copper  Teck Resources

Poor diversification

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

Pair Corralation between Faraday Copper and Teck Resources

Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 1.58 times more return on investment than Teck Resources. However, Faraday Copper is 1.58 times more volatile than Teck Resources Limited. It trades about 0.03 of its potential returns per unit of risk. Teck Resources Limited is currently generating about 0.02 per unit of risk. If you would invest  63.00  in Faraday Copper Corp on October 5, 2024 and sell it today you would earn a total of  11.00  from holding Faraday Copper Corp or generate 17.46% 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.  Teck Resources Limited

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.

Teck Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Teck Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Faraday Copper and Teck Resources

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

The idea behind Faraday Copper Corp and Teck Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.