Correlation Between Precious Metals and Fredonia Mining

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

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

Diversification Opportunities for Precious Metals and Fredonia Mining

0.07

Correlation Coefficient

Precious Metals  Fredonia Mining

Significant diversification

The 3 months correlation between Precious and Fredonia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And and Fredonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fredonia Mining and Precious 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 Precious Metals And are associated (or correlated) with Fredonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fredonia Mining has no effect on the direction of Precious Metals i.e., Precious Metals and Fredonia Mining go up and down completely randomly.

Pair Corralation between Precious Metals and Fredonia Mining

Assuming the 90 days trading horizon Precious Metals And is expected to under-perform the Fredonia Mining. But the stock apears to be less risky and, when comparing its historical volatility, Precious Metals And is 3.96 times less risky than Fredonia Mining. The stock trades about -0.06 of its potential returns per unit of risk. The Fredonia Mining is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  18.00  in Fredonia Mining on September 22, 2024 and sell it today you would earn a total of  10.00  from holding Fredonia Mining or generate 55.56% return on investment over 90 days.

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

Precious Metals And  vs.  Fredonia Mining

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fredonia Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fredonia Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Fredonia Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Precious Metals and Fredonia Mining

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

The idea behind Precious Metals And and Fredonia Mining 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.