Correlation Between Fine Metal and Golden Ventures

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

By analyzing existing cross correlation between Fine Metal Technologies and Golden Ventures Leasehold, you can compare the effects of market volatilities on Fine Metal and Golden Ventures 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 Fine Metal with a short position of Golden Ventures. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fine Metal and Golden Ventures.

Diversification Opportunities for Fine Metal and Golden Ventures

0.35

Correlation Coefficient

Fine Metal  Golden Ventures

Weak diversification

The 3 months correlation between Fine and Golden is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fine Metal Technologies and Golden Ventures Leasehold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Ventures Leasehold and Fine Metal 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 Fine Metal Technologies are associated (or correlated) with Golden Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Ventures Leasehold has no effect on the direction of Fine Metal i.e., Fine Metal and Golden Ventures go up and down completely randomly.

Pair Corralation between Fine Metal and Golden Ventures

Assuming the 90 days trading horizon Fine Metal Technologies is expected to generate 0.98 times more return on investment than Golden Ventures. However, Fine Metal Technologies is 1.02 times less risky than Golden Ventures. It trades about 0.19 of its potential returns per unit of risk. Golden Ventures Leasehold is currently generating about -0.08 per unit of risk. If you would invest  3,250  in Fine Metal Technologies on October 6, 2024 and sell it today you would earn a total of  100.00  from holding Fine Metal Technologies or generate 3.08% return on investment over 90 days.

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

Fine Metal Technologies  vs.  Golden Ventures Leasehold

Fine Metal Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Metal Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Fine Metal is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Golden Ventures Leasehold

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Ventures Leasehold are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Golden Ventures is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fine Metal and Golden Ventures

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

The idea behind Fine Metal Technologies and Golden Ventures Leasehold 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.