Correlation Between Graphite One and Focus Graphite

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

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

Diversification Opportunities for Graphite One and Focus Graphite

0.47

Correlation Coefficient

Graphite One  Focus Graphite

Very weak diversification

The 3 months correlation between Graphite and Focus is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Graphite One and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and Graphite One 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 Graphite One are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of Graphite One i.e., Graphite One and Focus Graphite go up and down completely randomly.

Pair Corralation between Graphite One and Focus Graphite

Assuming the 90 days horizon Graphite One is expected to generate 0.57 times more return on investment than Focus Graphite. However, Graphite One is 1.76 times less risky than Focus Graphite. It trades about 0.17 of its potential returns per unit of risk. Focus Graphite is currently generating about 0.05 per unit of risk. If you would invest  68.00  in Graphite One on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Graphite One or generate 39.71% return on investment over 90 days.

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

Graphite One  vs.  Focus Graphite

Graphite One

Risk-Adjusted Performance

Good

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

Focus Graphite

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Graphite One and Focus Graphite

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

The idea behind Graphite One and Focus Graphite 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.