Correlation Between Imperial Metals and First Quantum

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

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

Diversification Opportunities for Imperial Metals and First Quantum

-0.12

Correlation Coefficient

Imperial Metals  First Quantum

Good diversification

The 3 months correlation between Imperial and First is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Metals and First Quantum Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Quantum Minerals and Imperial 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 Imperial Metals are associated (or correlated) with First Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Quantum Minerals has no effect on the direction of Imperial Metals i.e., Imperial Metals and First Quantum go up and down completely randomly.

Pair Corralation between Imperial Metals and First Quantum

Assuming the 90 days trading horizon Imperial Metals is expected to under-perform the First Quantum. In addition to that, Imperial Metals is 1.23 times more volatile than First Quantum Minerals. It trades about -0.14 of its total potential returns per unit of risk. First Quantum Minerals is currently generating about -0.09 per unit of volatility. If you would invest  2,049  in First Quantum Minerals on October 9, 2024 and sell it today you would lose (110.00) from holding First Quantum Minerals or give up 5.37% of portfolio value over 90 days.

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

Imperial Metals  vs.  First Quantum Minerals

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

First Quantum Minerals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Quantum Minerals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, First Quantum may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Imperial Metals and First Quantum

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

The idea behind Imperial Metals and First Quantum Minerals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.