Correlation Between FIREWEED METALS and SEVENI HLDGS

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

By analyzing existing cross correlation between FIREWEED METALS P and SEVENI HLDGS UNSPADR12, you can compare the effects of market volatilities on FIREWEED METALS and SEVENI HLDGS 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 FIREWEED METALS with a short position of SEVENI HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIREWEED METALS and SEVENI HLDGS.

Diversification Opportunities for FIREWEED METALS and SEVENI HLDGS

0.03

Correlation Coefficient

FIREWEED METALS  SEVENI HLDGS

Significant diversification

The 3 months correlation between FIREWEED and SEVENI is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and SEVENI HLDGS UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEVENI HLDGS UNSPADR12 and FIREWEED 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 FIREWEED METALS P are associated (or correlated) with SEVENI HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEVENI HLDGS UNSPADR12 has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and SEVENI HLDGS go up and down completely randomly.

Pair Corralation between FIREWEED METALS and SEVENI HLDGS

Assuming the 90 days horizon FIREWEED METALS P is expected to generate 1.28 times more return on investment than SEVENI HLDGS. However, FIREWEED METALS is 1.28 times more volatile than SEVENI HLDGS UNSPADR12. It trades about 0.07 of its potential returns per unit of risk. SEVENI HLDGS UNSPADR12 is currently generating about 0.02 per unit of risk. If you would invest  96.00  in FIREWEED METALS P on December 30, 2024 and sell it today you would earn a total of  11.00  from holding FIREWEED METALS P or generate 11.46% return on investment over 90 days.

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

FIREWEED METALS P  vs.  SEVENI HLDGS UNSPADR12

FIREWEED METALS P

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FIREWEED METALS P are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FIREWEED METALS reported solid returns over the last few months and may actually be approaching a breakup point.

SEVENI HLDGS UNSPADR12

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SEVENI HLDGS UNSPADR12 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, SEVENI HLDGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FIREWEED METALS and SEVENI HLDGS

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

The idea behind FIREWEED METALS P and SEVENI HLDGS UNSPADR12 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.