Correlation Between Graphite One and Leading Edge

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

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

Diversification Opportunities for Graphite One and Leading Edge

0.21

Correlation Coefficient

Graphite One  Leading Edge

Modest diversification

The 3 months correlation between Graphite and Leading is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Graphite One and Leading Edge Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leading Edge Materials 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 Leading Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leading Edge Materials has no effect on the direction of Graphite One i.e., Graphite One and Leading Edge go up and down completely randomly.

Pair Corralation between Graphite One and Leading Edge

Assuming the 90 days horizon Graphite One is expected to generate 0.5 times more return on investment than Leading Edge. However, Graphite One is 1.99 times less risky than Leading Edge. It trades about 0.01 of its potential returns per unit of risk. Leading Edge Materials is currently generating about -0.02 per unit of risk. If you would invest  57.00  in Graphite One on September 10, 2024 and sell it today you would earn a total of  0.00  from holding Graphite One or generate 0.0% return on investment over 90 days.

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

Graphite One  vs.  Leading Edge Materials

Graphite One

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Graphite One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Leading Edge Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Leading Edge Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Graphite One and Leading Edge

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

The idea behind Graphite One and Leading Edge Materials 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.