Correlation Between Finlay Minerals and Tarku Resources

Can any of the company-specific risk be diversified away by investing in both Finlay Minerals and Tarku Resources 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 Finlay Minerals and Tarku Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Finlay Minerals and Tarku Resources, you can compare the effects of market volatilities on Finlay Minerals and Tarku Resources 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 Finlay Minerals with a short position of Tarku Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Finlay Minerals and Tarku Resources.

Diversification Opportunities for Finlay Minerals and Tarku Resources

-0.54

Correlation Coefficient

Finlay Minerals  Tarku Resources

Excellent diversification

The 3 months correlation between Finlay and Tarku is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Finlay Minerals and Tarku Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarku Resources and Finlay Minerals 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 Finlay Minerals are associated (or correlated) with Tarku Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarku Resources has no effect on the direction of Finlay Minerals i.e., Finlay Minerals and Tarku Resources go up and down completely randomly.

Pair Corralation between Finlay Minerals and Tarku Resources

Assuming the 90 days horizon Finlay Minerals is expected to generate 1.27 times more return on investment than Tarku Resources. However, Finlay Minerals is 1.27 times more volatile than Tarku Resources. It trades about 0.17 of its potential returns per unit of risk. Tarku Resources is currently generating about 0.04 per unit of risk. If you would invest  2.00  in Finlay Minerals on December 28, 2024 and sell it today you would earn a total of  6.00  from holding Finlay Minerals or generate 300.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Finlay Minerals  vs.  Tarku Resources

Finlay Minerals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Finlay Minerals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Finlay Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Tarku Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tarku Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Finlay Minerals and Tarku Resources

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

The idea behind Finlay Minerals and Tarku Resources 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.