Correlation Between Focus Graphite and Mason Graphite

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

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

Diversification Opportunities for Focus Graphite and Mason Graphite

0.14

Correlation Coefficient

Focus Graphite  Mason Graphite

Average diversification

The 3 months correlation between Focus and Mason is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Mason Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mason Graphite and Focus Graphite 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 Focus Graphite are associated (or correlated) with Mason Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mason Graphite has no effect on the direction of Focus Graphite i.e., Focus Graphite and Mason Graphite go up and down completely randomly.

Pair Corralation between Focus Graphite and Mason Graphite

Assuming the 90 days horizon Focus Graphite is expected to generate 12.8 times less return on investment than Mason Graphite. But when comparing it to its historical volatility, Focus Graphite is 1.92 times less risky than Mason Graphite. It trades about 0.03 of its potential returns per unit of risk. Mason Graphite is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4.50  in Mason Graphite on September 27, 2024 and sell it today you would earn a total of  3.00  from holding Mason Graphite or generate 66.67% return on investment over 90 days.

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

Focus Graphite  vs.  Mason Graphite

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Mason Graphite

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mason Graphite are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Mason Graphite showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Focus Graphite and Mason Graphite

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

The idea behind Focus Graphite and Mason Graphite 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.