Correlation Between Fireweed Zinc and Global Energy

Can any of the company-specific risk be diversified away by investing in both Fireweed Zinc and Global Energy 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 Fireweed Zinc and Global Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fireweed Zinc and Global Energy Metals, you can compare the effects of market volatilities on Fireweed Zinc and Global Energy 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 Fireweed Zinc with a short position of Global Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fireweed Zinc and Global Energy.

Diversification Opportunities for Fireweed Zinc and Global Energy

0.25

Correlation Coefficient

Fireweed Zinc  Global Energy

Modest diversification

The 3 months correlation between Fireweed and Global is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Fireweed Zinc and Global Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Energy Metals and Fireweed Zinc 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 Fireweed Zinc are associated (or correlated) with Global Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Energy Metals has no effect on the direction of Fireweed Zinc i.e., Fireweed Zinc and Global Energy go up and down completely randomly.

Pair Corralation between Fireweed Zinc and Global Energy

Assuming the 90 days horizon Fireweed Zinc is expected to generate 3.94 times less return on investment than Global Energy. But when comparing it to its historical volatility, Fireweed Zinc is 3.41 times less risky than Global Energy. It trades about 0.03 of its potential returns per unit of risk. Global Energy Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.42  in Global Energy Metals on September 12, 2024 and sell it today you would lose (0.06) from holding Global Energy Metals or give up 4.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Fireweed Zinc  vs.  Global Energy Metals

Fireweed Zinc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fireweed Zinc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Fireweed Zinc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Global Energy Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Energy Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Global Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fireweed Zinc and Global Energy

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

The idea behind Fireweed Zinc and Global Energy Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.