Correlation Between Lepanto Consolidated and Global Ferronickel

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

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

Diversification Opportunities for Lepanto Consolidated and Global Ferronickel

0.23

Correlation Coefficient

Lepanto Consolidated  Global Ferronickel

Modest diversification

The 3 months correlation between Lepanto and Global is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and Global Ferronickel Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Ferronickel and Lepanto Consolidated 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 Lepanto Consolidated Mining are associated (or correlated) with Global Ferronickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Ferronickel has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and Global Ferronickel go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and Global Ferronickel

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to generate 1.67 times more return on investment than Global Ferronickel. However, Lepanto Consolidated is 1.67 times more volatile than Global Ferronickel Holdings. It trades about 0.04 of its potential returns per unit of risk. Global Ferronickel Holdings is currently generating about -0.52 per unit of risk. If you would invest  6.70  in Lepanto Consolidated Mining on September 24, 2024 and sell it today you would earn a total of  0.10  from holding Lepanto Consolidated Mining or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  Global Ferronickel Holdings

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Global Ferronickel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Ferronickel Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Lepanto Consolidated and Global Ferronickel

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

The idea behind Lepanto Consolidated Mining and Global Ferronickel Holdings 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.