Correlation Between Globe Metals and FireFly Metals

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

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

Diversification Opportunities for Globe Metals and FireFly Metals

0.18

Correlation Coefficient

Globe Metals  FireFly Metals

Average diversification

The 3 months correlation between Globe and FireFly is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Globe Metals Mining and FireFly Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FireFly Metals and Globe Metals 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 Globe Metals Mining are associated (or correlated) with FireFly Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FireFly Metals has no effect on the direction of Globe Metals i.e., Globe Metals and FireFly Metals go up and down completely randomly.

Pair Corralation between Globe Metals and FireFly Metals

Assuming the 90 days trading horizon Globe Metals Mining is expected to generate 0.86 times more return on investment than FireFly Metals. However, Globe Metals Mining is 1.16 times less risky than FireFly Metals. It trades about 0.11 of its potential returns per unit of risk. FireFly Metals is currently generating about -0.12 per unit of risk. If you would invest  4.00  in Globe Metals Mining on October 10, 2024 and sell it today you would earn a total of  0.30  from holding Globe Metals Mining or generate 7.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Globe Metals Mining  vs.  FireFly Metals

Globe Metals Mining

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Globe Metals Mining are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Globe Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

FireFly Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FireFly Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Globe Metals and FireFly Metals

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

The idea behind Globe Metals Mining and FireFly 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.