Correlation Between First Energy and Traction Uranium

Can any of the company-specific risk be diversified away by investing in both First Energy and Traction Uranium 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 First Energy and Traction Uranium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Energy Metals and Traction Uranium Corp, you can compare the effects of market volatilities on First Energy and Traction Uranium 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 First Energy with a short position of Traction Uranium. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Energy and Traction Uranium.

Diversification Opportunities for First Energy and Traction Uranium

0.6

Correlation Coefficient

First Energy  Traction Uranium

Poor diversification

The 3 months correlation between First and Traction is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding First Energy Metals and Traction Uranium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traction Uranium Corp and First Energy 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 First Energy Metals are associated (or correlated) with Traction Uranium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traction Uranium Corp has no effect on the direction of First Energy i.e., First Energy and Traction Uranium go up and down completely randomly.

Pair Corralation between First Energy and Traction Uranium

Assuming the 90 days horizon First Energy Metals is expected to under-perform the Traction Uranium. But the otc stock apears to be less risky and, when comparing its historical volatility, First Energy Metals is 2.2 times less risky than Traction Uranium. The otc stock trades about -0.14 of its potential returns per unit of risk. The Traction Uranium Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Traction Uranium Corp on September 5, 2024 and sell it today you would lose (3.00) from holding Traction Uranium Corp or give up 12.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	91.3%
Values	Daily Returns

First Energy Metals  vs.  Traction Uranium Corp

First Energy Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Traction Uranium Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Traction Uranium Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Traction Uranium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Energy and Traction Uranium

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

The idea behind First Energy Metals and Traction Uranium Corp 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.