Correlation Between First Quantum and Hudbay Minerals

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

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

Diversification Opportunities for First Quantum and Hudbay Minerals

0.82

Correlation Coefficient

First Quantum  Hudbay Minerals

Very poor diversification

The 3 months correlation between First and Hudbay is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Quantum Minerals and Hudbay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudbay Minerals and First Quantum 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 First Quantum Minerals are associated (or correlated) with Hudbay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudbay Minerals has no effect on the direction of First Quantum i.e., First Quantum and Hudbay Minerals go up and down completely randomly.

Pair Corralation between First Quantum and Hudbay Minerals

Assuming the 90 days horizon First Quantum Minerals is expected to generate 1.03 times more return on investment than Hudbay Minerals. However, First Quantum is 1.03 times more volatile than Hudbay Minerals. It trades about 0.13 of its potential returns per unit of risk. Hudbay Minerals is currently generating about 0.1 per unit of risk. If you would invest  1,081  in First Quantum Minerals on September 3, 2024 and sell it today you would earn a total of  274.00  from holding First Quantum Minerals or generate 25.35% return on investment over 90 days.

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

First Quantum Minerals  vs.  Hudbay Minerals

First Quantum Minerals

Risk-Adjusted Performance

10 of 100

OK

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

Hudbay Minerals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudbay Minerals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Hudbay Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Quantum and Hudbay Minerals

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

The idea behind First Quantum Minerals and Hudbay Minerals 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.