Correlation Between Financial and Nortec Minerals

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

Diversification Opportunities for Financial and Nortec Minerals

0.37

Correlation Coefficient

Financial  Nortec Minerals

Weak diversification

The 3 months correlation between Financial and Nortec is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Nortec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nortec Minerals 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 Nortec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nortec Minerals Corp has no effect on the direction of Financial i.e., Financial and Nortec Minerals go up and down completely randomly.

Pair Corralation between Financial and Nortec Minerals

Assuming the 90 days trading horizon Financial is expected to generate 5.58 times less return on investment than Nortec Minerals. But when comparing it to its historical volatility, Financial 15 Split is 32.4 times less risky than Nortec Minerals. It trades about 0.18 of its potential returns per unit of risk. Nortec Minerals Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Nortec Minerals Corp on October 5, 2024 and sell it today you would lose (2.00) from holding Nortec Minerals Corp or give up 50.0% of portfolio value over 90 days.

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

Financial 15 Split  vs.  Nortec Minerals 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.

Nortec Minerals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nortec Minerals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nortec Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Financial and Nortec Minerals

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

The idea behind Financial 15 Split and Nortec Minerals 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.