Correlation Between First and Empire Metals
Can any of the company-specific risk be diversified away by investing in both First and Empire 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 and Empire Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Class Metals and Empire Metals Limited, you can compare the effects of market volatilities on First and Empire 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 with a short position of Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First and Empire Metals.
Diversification Opportunities for First and Empire Metals
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Empire is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Class Metals and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and First 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 Class Metals are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of First i.e., First and Empire Metals go up and down completely randomly.
Pair Corralation between First and Empire Metals
Assuming the 90 days trading horizon First Class Metals is expected to under-perform the Empire Metals. In addition to that, First is 1.31 times more volatile than Empire Metals Limited. It trades about -0.33 of its total potential returns per unit of risk. Empire Metals Limited is currently generating about 0.16 per unit of volatility. If you would invest 680.00 in Empire Metals Limited on October 13, 2024 and sell it today you would earn a total of 55.00 from holding Empire Metals Limited or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Class Metals vs. Empire Metals Limited
Performance |
| Timeline |
| First Class Metals |
| Empire Metals Limited |
First and Empire Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First and Empire Metals
The main advantage of trading using opposite First and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First position performs unexpectedly, Empire 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 Empire Metals will offset losses from the drop in Empire Metals' long position.| First vs. Spirent Communications plc | First vs. Pets at Home | First vs. Cairn Homes PLC | First vs. Ecclesiastical Insurance Office |
| Empire Metals vs. Fevertree Drinks Plc | Empire Metals vs. DXC Technology Co | Empire Metals vs. Cognizant Technology Solutions | Empire Metals vs. UNIQA Insurance Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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