Correlation Between Financial and World Copper

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

Diversification Opportunities for Financial and World Copper

-0.36

Correlation Coefficient

Financial  World Copper

Very good diversification

The 3 months correlation between Financial and World is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper 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 World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of Financial i.e., Financial and World Copper go up and down completely randomly.

Pair Corralation between Financial and World Copper

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.03 times more return on investment than World Copper. However, Financial 15 Split is 30.66 times less risky than World Copper. It trades about 0.4 of its potential returns per unit of risk. World Copper is currently generating about -0.23 per unit of risk. If you would invest  1,050  in Financial 15 Split on October 5, 2024 and sell it today you would earn a total of  19.00  from holding Financial 15 Split or generate 1.81% return on investment over 90 days.

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

Financial 15 Split  vs.  World Copper

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.

World Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Financial and World Copper

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

The idea behind Financial 15 Split and World Copper 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.