Correlation Between Financial and Grande Portage

Can any of the company-specific risk be diversified away by investing in both Financial and Grande Portage 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 Grande Portage 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 Grande Portage Resources, you can compare the effects of market volatilities on Financial and Grande Portage 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 Grande Portage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Grande Portage.

Diversification Opportunities for Financial and Grande Portage

-0.51

Correlation Coefficient

Financial  Grande Portage

Excellent diversification

The 3 months correlation between Financial and Grande is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Grande Portage Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grande Portage Resources 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 Grande Portage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grande Portage Resources has no effect on the direction of Financial i.e., Financial and Grande Portage go up and down completely randomly.

Pair Corralation between Financial and Grande Portage

Assuming the 90 days trading horizon Financial is expected to generate 2.97 times less return on investment than Grande Portage. But when comparing it to its historical volatility, Financial 15 Split is 21.78 times less risky than Grande Portage. It trades about 0.18 of its potential returns per unit of risk. Grande Portage Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in Grande Portage Resources on October 5, 2024 and sell it today you would lose (5.00) from holding Grande Portage Resources or give up 20.0% of portfolio value over 90 days.

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

Financial 15 Split  vs.  Grande Portage Resources

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.

Grande Portage Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grande Portage Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Grande Portage is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Financial and Grande Portage

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

The idea behind Financial 15 Split and Grande Portage Resources 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.