Correlation Between Ferrexpo PLC and Empire Metals

Can any of the company-specific risk be diversified away by investing in both Ferrexpo PLC and Empire 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 Ferrexpo PLC and Empire Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Ferrexpo PLC and Empire Metals

-0.24

Correlation Coefficient

Ferrexpo PLC  Empire Metals

Very good diversification

The 3 months correlation between Ferrexpo and Empire is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and Ferrexpo PLC 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 Ferrexpo PLC are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Ferrexpo PLC i.e., Ferrexpo PLC and Empire Metals go up and down completely randomly.

Pair Corralation between Ferrexpo PLC and Empire Metals

Assuming the 90 days trading horizon Ferrexpo PLC is expected to under-perform the Empire Metals. In addition to that, Ferrexpo PLC is 1.94 times more volatile than Empire Metals Limited. It trades about 0.0 of its total potential returns per unit of risk. Empire Metals Limited is currently generating about 0.24 per unit of volatility. If you would invest  570.00  in Empire Metals Limited on December 2, 2024 and sell it today you would earn a total of  390.00  from holding Empire Metals Limited or generate 68.42% return on investment over 90 days.

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

Ferrexpo PLC  vs.  Empire Metals Limited

Ferrexpo PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferrexpo PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Ferrexpo PLC is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Empire Metals Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Metals Limited are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Empire Metals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ferrexpo PLC and Empire Metals

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

The idea behind Ferrexpo PLC and Empire Metals Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.