Correlation Between Fresnillo PLC and Clean Air

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

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

Diversification Opportunities for Fresnillo PLC and Clean Air

0.56

Correlation Coefficient

Fresnillo PLC  Clean Air

Very weak diversification

The 3 months correlation between Fresnillo and Clean is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fresnillo PLC and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals and Fresnillo PLC 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 Fresnillo PLC are associated (or correlated) with Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Fresnillo PLC i.e., Fresnillo PLC and Clean Air go up and down completely randomly.

Pair Corralation between Fresnillo PLC and Clean Air

Assuming the 90 days horizon Fresnillo PLC is expected to generate 0.41 times more return on investment than Clean Air. However, Fresnillo PLC is 2.46 times less risky than Clean Air. It trades about 0.13 of its potential returns per unit of risk. Clean Air Metals is currently generating about -0.04 per unit of risk. If you would invest  706.00  in Fresnillo PLC on September 12, 2024 and sell it today you would earn a total of  169.00  from holding Fresnillo PLC or generate 23.94% return on investment over 90 days.

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

Fresnillo PLC  vs.  Clean Air Metals

Fresnillo PLC

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresnillo PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fresnillo PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Clean Air Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Air 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 primary 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.

Pair Trading with Fresnillo PLC and Clean Air

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

The idea behind Fresnillo PLC and Clean Air Metals 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.