Correlation Between Global Ferronickel and Lepanto Consolidated

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

By analyzing existing cross correlation between Global Ferronickel Holdings and Lepanto Consolidated Mining, you can compare the effects of market volatilities on Global Ferronickel and Lepanto Consolidated 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 Global Ferronickel with a short position of Lepanto Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ferronickel and Lepanto Consolidated.

Diversification Opportunities for Global Ferronickel and Lepanto Consolidated

0.23

Correlation Coefficient

Global Ferronickel  Lepanto Consolidated

Modest diversification

The 3 months correlation between Global and Lepanto is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global Ferronickel Holdings and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated and Global Ferronickel 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 Global Ferronickel Holdings are associated (or correlated) with Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Global Ferronickel i.e., Global Ferronickel and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Global Ferronickel and Lepanto Consolidated

Assuming the 90 days trading horizon Global Ferronickel Holdings is expected to under-perform the Lepanto Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Global Ferronickel Holdings is 2.19 times less risky than Lepanto Consolidated. The stock trades about -0.19 of its potential returns per unit of risk. The Lepanto Consolidated Mining is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.20  in Lepanto Consolidated Mining on September 24, 2024 and sell it today you would earn a total of  0.60  from holding Lepanto Consolidated Mining or generate 9.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.38%
Values	Daily Returns

Global Ferronickel Holdings  vs.  Lepanto Consolidated Mining

Global Ferronickel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ferronickel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Ferronickel and Lepanto Consolidated

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

The idea behind Global Ferronickel Holdings and Lepanto Consolidated Mining 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.