Correlation Between Generation Mining and Fredonia Mining

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

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

Diversification Opportunities for Generation Mining and Fredonia Mining

-0.14

Correlation Coefficient

Generation Mining  Fredonia Mining

Good diversification

The 3 months correlation between Generation and Fredonia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Generation Mining and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia Mining and Generation Mining 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 Generation Mining are associated (or correlated) with Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of Generation Mining i.e., Generation Mining and Fredonia Mining go up and down completely randomly.

Pair Corralation between Generation Mining and Fredonia Mining

Assuming the 90 days trading horizon Generation Mining is expected to generate 1.05 times more return on investment than Fredonia Mining. However, Generation Mining is 1.05 times more volatile than Fredonia Mining. It trades about 0.08 of its potential returns per unit of risk. Fredonia Mining is currently generating about -0.05 per unit of risk. If you would invest  14.00  in Generation Mining on December 26, 2024 and sell it today you would earn a total of  3.00  from holding Generation Mining or generate 21.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Generation Mining  vs.  Fredonia Mining

Generation Mining

Risk-Adjusted Performance

Modest

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

Fredonia Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fredonia Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Generation Mining and Fredonia Mining

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

The idea behind Generation Mining and Fredonia Mining 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.