Correlation Between First Mining and Bri Chem
Can any of the company-specific risk be diversified away by investing in both First Mining and Bri Chem 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 Mining and Bri Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Mining Gold and Bri Chem Corp, you can compare the effects of market volatilities on First Mining and Bri Chem 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 Mining with a short position of Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Mining and Bri Chem.
Diversification Opportunities for First Mining and Bri Chem
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Bri is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Mining Gold and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and First Mining 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 Mining Gold are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of First Mining i.e., First Mining and Bri Chem go up and down completely randomly.
Pair Corralation between First Mining and Bri Chem
Assuming the 90 days horizon First Mining Gold is expected to under-perform the Bri Chem. But the stock apears to be less risky and, when comparing its historical volatility, First Mining Gold is 1.48 times less risky than Bri Chem. The stock trades about -0.11 of its potential returns per unit of risk. The Bri Chem Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 34.00 in Bri Chem Corp on October 20, 2024 and sell it today you would earn a total of 1.00 from holding Bri Chem Corp or generate 2.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Mining Gold vs. Bri Chem Corp
Performance |
| Timeline |
| First Mining Gold |
| Bri Chem Corp |
First Mining and Bri Chem Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Mining and Bri Chem
The main advantage of trading using opposite First Mining and Bri Chem positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Mining position performs unexpectedly, Bri Chem 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 Bri Chem will offset losses from the drop in Bri Chem's long position.The idea behind First Mining Gold and Bri Chem Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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