Correlation Between Focus Graphite and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both Focus Graphite and Sumitomo Metal 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 Focus Graphite and Sumitomo Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Graphite and Sumitomo Metal Mining, you can compare the effects of market volatilities on Focus Graphite and Sumitomo Metal 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 Focus Graphite with a short position of Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Graphite and Sumitomo Metal.
Diversification Opportunities for Focus Graphite and Sumitomo Metal
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Focus and Sumitomo is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining and Focus Graphite 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 Focus Graphite are associated (or correlated) with Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Focus Graphite i.e., Focus Graphite and Sumitomo Metal go up and down completely randomly.
Pair Corralation between Focus Graphite and Sumitomo Metal
Assuming the 90 days horizon Focus Graphite is expected to generate 4.9 times more return on investment than Sumitomo Metal. However, Focus Graphite is 4.9 times more volatile than Sumitomo Metal Mining. It trades about 0.12 of its potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.14 per unit of risk. If you would invest 6.00 in Focus Graphite on September 13, 2024 and sell it today you would earn a total of 1.00 from holding Focus Graphite or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Focus Graphite vs. Sumitomo Metal Mining
Performance |
| Timeline |
| Focus Graphite |
| Sumitomo Metal Mining |
Focus Graphite and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focus Graphite and Sumitomo Metal
The main advantage of trading using opposite Focus Graphite and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Graphite position performs unexpectedly, Sumitomo Metal 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 Sumitomo Metal will offset losses from the drop in Sumitomo Metal's long position.| Focus Graphite vs. Northern Graphite | Focus Graphite vs. Syrah Resources Limited | Focus Graphite vs. Altura Mining Limited | Focus Graphite vs. Vulcan Minerals |
| Sumitomo Metal vs. Qubec Nickel Corp | Sumitomo Metal vs. IGO Limited | Sumitomo Metal vs. Focus Graphite | Sumitomo Metal vs. Mineral Res |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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