Correlation Between Financial and Talon Metals

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

Diversification Opportunities for Financial and Talon Metals

-0.46

Correlation Coefficient

Financial  Talon Metals

Very good diversification

The 3 months correlation between Financial and Talon is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Talon Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talon Metals 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 Talon Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talon Metals Corp has no effect on the direction of Financial i.e., Financial and Talon Metals go up and down completely randomly.

Pair Corralation between Financial and Talon Metals

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.07 times more return on investment than Talon Metals. However, Financial 15 Split is 14.06 times less risky than Talon Metals. It trades about 0.18 of its potential returns per unit of risk. Talon Metals Corp is currently generating about -0.06 per unit of risk. If you would invest  820.00  in Financial 15 Split on October 4, 2024 and sell it today you would earn a total of  249.00  from holding Financial 15 Split or generate 30.37% return on investment over 90 days.

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

Financial 15 Split  vs.  Talon Metals 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.

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Talon Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Financial and Talon Metals

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

The idea behind Financial 15 Split and Talon Metals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.