Correlation Between Financial and Excelsior Mining

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

Diversification Opportunities for Financial and Excelsior Mining

0.63

Correlation Coefficient

Financial  Excelsior Mining

Poor diversification

The 3 months correlation between Financial and Excelsior is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Excelsior Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelsior Mining Corp 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 Excelsior Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelsior Mining Corp has no effect on the direction of Financial i.e., Financial and Excelsior Mining go up and down completely randomly.

Pair Corralation between Financial and Excelsior Mining

Assuming the 90 days trading horizon Financial is expected to generate 2.68 times less return on investment than Excelsior Mining. But when comparing it to its historical volatility, Financial 15 Split is 19.84 times less risky than Excelsior Mining. It trades about 0.18 of its potential returns per unit of risk. Excelsior Mining Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Excelsior Mining Corp on October 5, 2024 and sell it today you would lose (3.00) from holding Excelsior Mining Corp or give up 13.04% of portfolio value over 90 days.

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

Financial 15 Split  vs.  Excelsior Mining Corp

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.

Excelsior Mining Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Excelsior Mining Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Excelsior Mining displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Excelsior Mining

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

The idea behind Financial 15 Split and Excelsior Mining Corp 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.