Correlation Between Q2 Metals and Faraday Copper

Can any of the company-specific risk be diversified away by investing in both Q2 Metals and Faraday Copper 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 Q2 Metals and Faraday Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Q2 Metals Corp and Faraday Copper Corp, you can compare the effects of market volatilities on Q2 Metals and Faraday Copper 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 Q2 Metals with a short position of Faraday Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Q2 Metals and Faraday Copper.

Diversification Opportunities for Q2 Metals and Faraday Copper

0.65

Correlation Coefficient

Q2 Metals  Faraday Copper

Poor diversification

The 3 months correlation between QTWO and Faraday is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Q2 Metals Corp and Faraday Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faraday Copper Corp and Q2 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 Q2 Metals Corp are associated (or correlated) with Faraday Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faraday Copper Corp has no effect on the direction of Q2 Metals i.e., Q2 Metals and Faraday Copper go up and down completely randomly.

Pair Corralation between Q2 Metals and Faraday Copper

Assuming the 90 days trading horizon Q2 Metals Corp is expected to under-perform the Faraday Copper. In addition to that, Q2 Metals is 2.71 times more volatile than Faraday Copper Corp. It trades about -0.11 of its total potential returns per unit of risk. Faraday Copper Corp is currently generating about -0.27 per unit of volatility. If you would invest  90.00  in Faraday Copper Corp on September 23, 2024 and sell it today you would lose (12.00) from holding Faraday Copper Corp or give up 13.33% of portfolio value over 90 days.

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

Q2 Metals Corp  vs.  Faraday Copper Corp

Q2 Metals Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Q2 Metals Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Q2 Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Faraday Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Faraday Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Faraday Copper is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Q2 Metals and Faraday Copper

The main advantage of trading using opposite Q2 Metals and Faraday Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Q2 Metals position performs unexpectedly, Faraday Copper 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 Faraday Copper will offset losses from the drop in Faraday Copper's long position.

The idea behind Q2 Metals Corp and Faraday Copper Corp 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 Valuation module to check real value of public entities based on technical and fundamental data.