Correlation Between First American and Power Metals
Can any of the company-specific risk be diversified away by investing in both First American and Power Metals 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 First American and Power Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First American Silver and Power Metals Corp, you can compare the effects of market volatilities on First American and Power Metals 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 First American with a short position of Power Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First American and Power Metals.
Diversification Opportunities for First American and Power Metals
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between First and Power is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Silver and Power Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metals Corp and First American 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 First American Silver are associated (or correlated) with Power Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metals Corp has no effect on the direction of First American i.e., First American and Power Metals go up and down completely randomly.
Pair Corralation between First American and Power Metals
Given the investment horizon of 90 days First American Silver is expected to generate 9.25 times more return on investment than Power Metals. However, First American is 9.25 times more volatile than Power Metals Corp. It trades about 0.05 of its potential returns per unit of risk. Power Metals Corp is currently generating about 0.03 per unit of risk. If you would invest 0.03 in First American Silver on September 3, 2024 and sell it today you would lose (0.02) from holding First American Silver or give up 66.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
First American Silver vs. Power Metals Corp
Performance |
| Timeline |
| First American Silver |
| Power Metals Corp |
First American and Power Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First American and Power Metals
The main advantage of trading using opposite First American and Power Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American position performs unexpectedly, Power Metals 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 Power Metals will offset losses from the drop in Power Metals' long position.| First American vs. Australian Vanadium Limited | First American vs. International Lithium Corp | First American vs. Wealth Minerals | First American vs. Decade Resources |
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Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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