Correlation Between Future Generation and Firetail Resources

Can any of the company-specific risk be diversified away by investing in both Future Generation and Firetail 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 Future Generation and Firetail Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Future Generation Global and Firetail Resources, you can compare the effects of market volatilities on Future Generation and Firetail 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 Future Generation with a short position of Firetail Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Generation and Firetail Resources.

Diversification Opportunities for Future Generation and Firetail Resources

0.26

Correlation Coefficient

Future Generation  Firetail Resources

Modest diversification

The 3 months correlation between Future and Firetail is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Future Generation Global and Firetail Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firetail Resources and Future Generation 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 Future Generation Global are associated (or correlated) with Firetail Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firetail Resources has no effect on the direction of Future Generation i.e., Future Generation and Firetail Resources go up and down completely randomly.

Pair Corralation between Future Generation and Firetail Resources

Assuming the 90 days trading horizon Future Generation is expected to generate 2.36 times less return on investment than Firetail Resources. But when comparing it to its historical volatility, Future Generation Global is 8.03 times less risky than Firetail Resources. It trades about 0.14 of its potential returns per unit of risk. Firetail Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7.80  in Firetail Resources on September 3, 2024 and sell it today you would earn a total of  0.20  from holding Firetail Resources or generate 2.56% return on investment over 90 days.

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

Future Generation Global  vs.  Firetail Resources

Future Generation Global

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Future Generation Global are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Future Generation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Firetail Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Firetail Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Firetail Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Generation and Firetail Resources

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

The idea behind Future Generation Global and Firetail Resources 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.