Correlation Between Talon Metals and Faction Investment

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

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

Diversification Opportunities for Talon Metals and Faction Investment

-0.23

Correlation Coefficient

Talon Metals  Faction Investment

Very good diversification

The 3 months correlation between Talon and Faction is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp and Faction Investment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Faction Investment and Talon 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 Talon Metals Corp are associated (or correlated) with Faction Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Faction Investment has no effect on the direction of Talon Metals i.e., Talon Metals and Faction Investment go up and down completely randomly.

Pair Corralation between Talon Metals and Faction Investment

Assuming the 90 days trading horizon Talon Metals is expected to generate 88.34 times less return on investment than Faction Investment. But when comparing it to its historical volatility, Talon Metals Corp is 5.66 times less risky than Faction Investment. It trades about 0.01 of its potential returns per unit of risk. Faction Investment Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Faction Investment Group on October 23, 2024 and sell it today you would earn a total of  3.50  from holding Faction Investment Group or generate 233.33% return on investment over 90 days.

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

Talon Metals Corp  vs.  Faction Investment Group

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Faction Investment

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Faction Investment Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Faction Investment sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talon Metals and Faction Investment

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

The idea behind Talon Metals Corp and Faction Investment Group 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 CEOs Directory module to screen CEOs from public companies around the world.