Correlation Between Red Pine and Faraday Copper

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

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

Diversification Opportunities for Red Pine and Faraday Copper

-0.24

Correlation Coefficient

Red Pine  Faraday Copper

Very good diversification

The 3 months correlation between Red and Faraday is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Red Pine Exploration 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 Red Pine 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 Red Pine Exploration 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 Red Pine i.e., Red Pine and Faraday Copper go up and down completely randomly.

Pair Corralation between Red Pine and Faraday Copper

Assuming the 90 days horizon Red Pine is expected to generate 2.0 times less return on investment than Faraday Copper. In addition to that, Red Pine is 1.68 times more volatile than Faraday Copper Corp. It trades about 0.02 of its total potential returns per unit of risk. Faraday Copper Corp is currently generating about 0.06 per unit of volatility. If you would invest  75.00  in Faraday Copper Corp on December 2, 2024 and sell it today you would earn a total of  4.00  from holding Faraday Copper Corp or generate 5.33% return on investment over 90 days.

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

Red Pine Exploration  vs.  Faraday Copper Corp

Red Pine Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Pine Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Red Pine is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Faraday Copper Corp

Risk-Adjusted Performance

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Red Pine and Faraday Copper

The main advantage of trading using opposite Red Pine and Faraday Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Pine 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 Red Pine Exploration 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..