Correlation Between Zinc One and Focus Graphite

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

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

Diversification Opportunities for Zinc One and Focus Graphite

0.41

Correlation Coefficient

Zinc One  Focus Graphite

Very weak diversification

The 3 months correlation between Zinc and Focus is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Zinc One Resources and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite and Zinc One 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 Zinc One Resources 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 Zinc One i.e., Zinc One and Focus Graphite go up and down completely randomly.

Pair Corralation between Zinc One and Focus Graphite

Assuming the 90 days horizon Zinc One is expected to generate 1.9 times less return on investment than Focus Graphite. But when comparing it to its historical volatility, Zinc One Resources is 5.57 times less risky than Focus Graphite. It trades about 0.13 of its potential returns per unit of risk. Focus Graphite is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Focus Graphite on December 28, 2024 and sell it today you would earn a total of  0.00  from holding Focus Graphite or generate 0.0% return on investment over 90 days.

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

Zinc One Resources  vs.  Focus Graphite

Zinc One Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zinc One Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Zinc One reported solid returns over the last few months and may actually be approaching a breakup point.

Focus Graphite

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Focus Graphite are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Focus Graphite reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zinc One and Focus Graphite

The main advantage of trading using opposite Zinc One and Focus Graphite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zinc One 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 Zinc One Resources 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.