Correlation Between First Energy and Atacama Resources
Can any of the company-specific risk be diversified away by investing in both First Energy and Atacama Resources 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 Energy and Atacama Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Energy Metals and Atacama Resources International, you can compare the effects of market volatilities on First Energy and Atacama Resources 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 Energy with a short position of Atacama Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Energy and Atacama Resources.
Diversification Opportunities for First Energy and Atacama Resources
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Atacama is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Energy Metals and Atacama Resources Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atacama Resources and First Energy 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 Energy Metals are associated (or correlated) with Atacama Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atacama Resources has no effect on the direction of First Energy i.e., First Energy and Atacama Resources go up and down completely randomly.
Pair Corralation between First Energy and Atacama Resources
Assuming the 90 days horizon First Energy is expected to generate 22.54 times less return on investment than Atacama Resources. But when comparing it to its historical volatility, First Energy Metals is 1.69 times less risky than Atacama Resources. It trades about 0.0 of its potential returns per unit of risk. Atacama Resources International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.35 in Atacama Resources International on October 26, 2024 and sell it today you would lose (0.12) from holding Atacama Resources International or give up 34.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Energy Metals vs. Atacama Resources Internationa
Performance |
| Timeline |
| First Energy Metals |
| Atacama Resources |
First Energy and Atacama Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Energy and Atacama Resources
The main advantage of trading using opposite First Energy and Atacama Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Energy position performs unexpectedly, Atacama Resources 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 Atacama Resources will offset losses from the drop in Atacama Resources' long position.| First Energy vs. MCF Energy | First Energy vs. Hypercharge Networks Corp | First Energy vs. Traction Uranium Corp | First Energy vs. F3 Uranium Corp |
| Atacama Resources vs. Huntsman Exploration | Atacama Resources vs. Aurelia Metals Limited | Atacama Resources vs. Adriatic Metals PLC | Atacama Resources vs. American Helium |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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