Correlation Between Financial and Copper Fox

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

By analyzing existing cross correlation between Financial 15 Split and Copper Fox Metals, you can compare the effects of market volatilities on Financial and Copper Fox 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 Financial with a short position of Copper Fox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Copper Fox.

Diversification Opportunities for Financial and Copper Fox

0.06

Correlation Coefficient

Financial  Copper Fox

Significant diversification

The 3 months correlation between Financial and Copper is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Copper Fox Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Fox Metals and Financial 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 Financial 15 Split are associated (or correlated) with Copper Fox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Fox Metals has no effect on the direction of Financial i.e., Financial and Copper Fox go up and down completely randomly.

Pair Corralation between Financial and Copper Fox

Assuming the 90 days trading horizon Financial is expected to generate 3.96 times less return on investment than Copper Fox. But when comparing it to its historical volatility, Financial 15 Split is 28.58 times less risky than Copper Fox. It trades about 0.31 of its potential returns per unit of risk. Copper Fox Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Copper Fox Metals on October 4, 2024 and sell it today you would earn a total of  1.00  from holding Copper Fox Metals or generate 3.57% return on investment over 90 days.

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

Financial 15 Split  vs.  Copper Fox Metals

Financial 15 Split

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Copper Fox Metals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Fox Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Copper Fox showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Copper Fox

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

The idea behind Financial 15 Split and Copper Fox 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.