Correlation Between Pampa Metals and Focus Graphite

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

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

Diversification Opportunities for Pampa Metals and Focus Graphite

0.35

Correlation Coefficient

Pampa Metals  Focus Graphite

Weak diversification

The 3 months correlation between Pampa and Focus is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Metals and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and Pampa 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 Pampa Metals 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 Pampa Metals i.e., Pampa Metals and Focus Graphite go up and down completely randomly.

Pair Corralation between Pampa Metals and Focus Graphite

Assuming the 90 days horizon Pampa Metals is expected to generate 0.83 times more return on investment than Focus Graphite. However, Pampa Metals is 1.2 times less risky than Focus Graphite. It trades about 0.04 of its potential returns per unit of risk. Focus Graphite is currently generating about -0.04 per unit of risk. If you would invest  15.00  in Pampa Metals on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Pampa Metals or generate 0.0% return on investment over 90 days.

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

Pampa Metals  vs.  Focus Graphite

Pampa Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Pampa Metals reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite abnormal performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pampa Metals and Focus Graphite

The main advantage of trading using opposite Pampa Metals and Focus Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pampa Metals 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 Pampa Metals 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.