Correlation Between Firestone Ventures and Cornish Metals

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

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

Diversification Opportunities for Firestone Ventures and Cornish Metals

0.49

Correlation Coefficient

Firestone Ventures  Cornish Metals

Very weak diversification

The 3 months correlation between Firestone and Cornish is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Firestone Ventures and Cornish Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cornish Metals and Firestone Ventures 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 Firestone Ventures are associated (or correlated) with Cornish Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cornish Metals has no effect on the direction of Firestone Ventures i.e., Firestone Ventures and Cornish Metals go up and down completely randomly.

Pair Corralation between Firestone Ventures and Cornish Metals

Assuming the 90 days horizon Firestone Ventures is expected to generate 0.84 times more return on investment than Cornish Metals. However, Firestone Ventures is 1.19 times less risky than Cornish Metals. It trades about 0.13 of its potential returns per unit of risk. Cornish Metals is currently generating about 0.01 per unit of risk. If you would invest  1.69  in Firestone Ventures on December 1, 2024 and sell it today you would earn a total of  0.81  from holding Firestone Ventures or generate 47.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Firestone Ventures  vs.  Cornish Metals

Firestone Ventures

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Firestone Ventures are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Firestone Ventures reported solid returns over the last few months and may actually be approaching a breakup point.

Cornish Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cornish Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Cornish Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Firestone Ventures and Cornish Metals

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

The idea behind Firestone Ventures and Cornish 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.