Correlation Between ValOre Metals and First Trust

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

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

Diversification Opportunities for ValOre Metals and First Trust

0.84

Correlation Coefficient

ValOre Metals  First Trust

Very poor diversification

The 3 months correlation between ValOre and First is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ValOre Metals Corp and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx and ValOre 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 ValOre Metals Corp are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Indxx has no effect on the direction of ValOre Metals i.e., ValOre Metals and First Trust go up and down completely randomly.

Pair Corralation between ValOre Metals and First Trust

Given the investment horizon of 90 days ValOre Metals Corp is expected to generate 31.56 times more return on investment than First Trust. However, ValOre Metals is 31.56 times more volatile than First Trust Indxx. It trades about 0.09 of its potential returns per unit of risk. First Trust Indxx is currently generating about 0.16 per unit of risk. If you would invest  6.00  in ValOre Metals Corp on August 31, 2024 and sell it today you would earn a total of  2.00  from holding ValOre Metals Corp or generate 33.33% return on investment over 90 days.

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

ValOre Metals Corp  vs.  First Trust Indxx

ValOre Metals Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ValOre Metals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ValOre Metals showed solid returns over the last few months and may actually be approaching a breakup point.

First Trust Indxx

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, First Trust is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ValOre Metals and First Trust

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

The idea behind ValOre Metals Corp and First Trust Indxx 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.