Correlation Between NGEx Minerals and Foran Mining

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

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

Diversification Opportunities for NGEx Minerals and Foran Mining

0.36

Correlation Coefficient

NGEx Minerals  Foran Mining

Weak diversification

The 3 months correlation between NGEx and Foran is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding NGEx Minerals and Foran Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foran Mining and NGEx Minerals 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 NGEx Minerals are associated (or correlated) with Foran Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foran Mining has no effect on the direction of NGEx Minerals i.e., NGEx Minerals and Foran Mining go up and down completely randomly.

Pair Corralation between NGEx Minerals and Foran Mining

Assuming the 90 days trading horizon NGEx Minerals is expected to generate 0.97 times more return on investment than Foran Mining. However, NGEx Minerals is 1.03 times less risky than Foran Mining. It trades about 0.07 of its potential returns per unit of risk. Foran Mining is currently generating about -0.04 per unit of risk. If you would invest  1,176  in NGEx Minerals on September 19, 2024 and sell it today you would earn a total of  59.00  from holding NGEx Minerals or generate 5.02% return on investment over 90 days.

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

NGEx Minerals  vs.  Foran Mining

NGEx Minerals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGEx Minerals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, NGEx Minerals displayed solid returns over the last few months and may actually be approaching a breakup point.

Foran Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Foran Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Foran Mining is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NGEx Minerals and Foran Mining

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

The idea behind NGEx Minerals and Foran 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.