Correlation Between Faraday Copper and Canfor
Can any of the company-specific risk be diversified away by investing in both Faraday Copper and Canfor 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 Faraday Copper and Canfor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Faraday Copper Corp and Canfor, you can compare the effects of market volatilities on Faraday Copper and Canfor 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 Faraday Copper with a short position of Canfor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and Canfor.
Diversification Opportunities for Faraday Copper and Canfor
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Faraday and Canfor is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Canfor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canfor and Faraday Copper 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 Faraday Copper Corp are associated (or correlated) with Canfor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canfor has no effect on the direction of Faraday Copper i.e., Faraday Copper and Canfor go up and down completely randomly.
Pair Corralation between Faraday Copper and Canfor
Assuming the 90 days trading horizon Faraday Copper Corp is expected to under-perform the Canfor. In addition to that, Faraday Copper is 1.09 times more volatile than Canfor. It trades about -0.24 of its total potential returns per unit of risk. Canfor is currently generating about -0.09 per unit of volatility. If you would invest 1,670 in Canfor on November 7, 2024 and sell it today you would lose (174.00) from holding Canfor or give up 10.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Faraday Copper Corp vs. Canfor
Performance |
| Timeline |
| Faraday Copper Corp |
| Canfor |
Faraday Copper and Canfor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Faraday Copper and Canfor
The main advantage of trading using opposite Faraday Copper and Canfor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper position performs unexpectedly, Canfor 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 Canfor will offset losses from the drop in Canfor's long position.The idea behind Faraday Copper Corp and Canfor 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.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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