Correlation Between Outcrop Gold and Focus Graphite

Can any of the company-specific risk be diversified away by investing in both Outcrop Gold and Focus Graphite 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 Outcrop Gold and Focus Graphite into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Outcrop Gold Corp and Focus Graphite, you can compare the effects of market volatilities on Outcrop Gold and Focus Graphite 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 Outcrop Gold with a short position of Focus Graphite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Outcrop Gold and Focus Graphite.

Diversification Opportunities for Outcrop Gold and Focus Graphite

0.35

Correlation Coefficient

Outcrop Gold  Focus Graphite

Weak diversification

The 3 months correlation between Outcrop and Focus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Outcrop Gold Corp and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and Outcrop Gold 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 Outcrop Gold Corp are associated (or correlated) with Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of Outcrop Gold i.e., Outcrop Gold and Focus Graphite go up and down completely randomly.

Pair Corralation between Outcrop Gold and Focus Graphite

Assuming the 90 days horizon Outcrop Gold Corp is expected to under-perform the Focus Graphite. But the stock apears to be less risky and, when comparing its historical volatility, Outcrop Gold Corp is 1.62 times less risky than Focus Graphite. The stock trades about -0.14 of its potential returns per unit of risk. The Focus Graphite is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Focus Graphite on September 29, 2024 and sell it today you would lose (0.50) from holding Focus Graphite or give up 6.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Outcrop Gold Corp  vs.  Focus Graphite

Outcrop Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Outcrop Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Outcrop Gold and Focus Graphite

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

The idea behind Outcrop Gold Corp and Focus Graphite 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.