Correlation Between Highland Copper and Copper Fox

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

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

Diversification Opportunities for Highland Copper and Copper Fox

0.13

Correlation Coefficient

Highland Copper  Copper Fox

Average diversification

The 3 months correlation between Highland and Copper is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Highland Copper and Copper Fox Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Fox Metals and Highland Copper 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 Highland Copper are associated (or correlated) with Copper Fox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Fox Metals has no effect on the direction of Highland Copper i.e., Highland Copper and Copper Fox go up and down completely randomly.

Pair Corralation between Highland Copper and Copper Fox

Assuming the 90 days horizon Highland Copper is expected to under-perform the Copper Fox. But the otc stock apears to be less risky and, when comparing its historical volatility, Highland Copper is 1.85 times less risky than Copper Fox. The otc stock trades about -0.05 of its potential returns per unit of risk. The Copper Fox Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Copper Fox Metals on September 20, 2024 and sell it today you would lose (4.00) from holding Copper Fox Metals or give up 12.9% of portfolio value over 90 days.

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

Highland Copper  vs.  Copper Fox Metals

Highland Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Copper Fox Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Copper Fox Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Copper Fox is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Highland Copper and Copper Fox

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

The idea behind Highland Copper and Copper Fox 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.