Correlation Between FireFly Metals and Vulcan Steel
Can any of the company-specific risk be diversified away by investing in both FireFly Metals and Vulcan Steel 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 FireFly Metals and Vulcan Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FireFly Metals and Vulcan Steel, you can compare the effects of market volatilities on FireFly Metals and Vulcan Steel 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 FireFly Metals with a short position of Vulcan Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of FireFly Metals and Vulcan Steel.
Diversification Opportunities for FireFly Metals and Vulcan Steel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FireFly and Vulcan is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding FireFly Metals and Vulcan Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Steel and FireFly Metals 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 FireFly Metals are associated (or correlated) with Vulcan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Steel has no effect on the direction of FireFly Metals i.e., FireFly Metals and Vulcan Steel go up and down completely randomly.
Pair Corralation between FireFly Metals and Vulcan Steel
Assuming the 90 days trading horizon FireFly Metals is expected to generate 1.06 times more return on investment than Vulcan Steel. However, FireFly Metals is 1.06 times more volatile than Vulcan Steel. It trades about 0.0 of its potential returns per unit of risk. Vulcan Steel is currently generating about -0.02 per unit of risk. If you would invest 91.00 in FireFly Metals on November 9, 2024 and sell it today you would lose (1.00) from holding FireFly Metals or give up 1.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FireFly Metals vs. Vulcan Steel
Performance |
| Timeline |
| FireFly Metals |
| Vulcan Steel |
FireFly Metals and Vulcan Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FireFly Metals and Vulcan Steel
The main advantage of trading using opposite FireFly Metals and Vulcan Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FireFly Metals position performs unexpectedly, Vulcan Steel 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 Vulcan Steel will offset losses from the drop in Vulcan Steel's long position.| FireFly Metals vs. National Australia Bank | FireFly Metals vs. Qbe Insurance Group | FireFly Metals vs. COG Financial Services | FireFly Metals vs. K2 Asset Management |
| Vulcan Steel vs. Kkr Credit Income | Vulcan Steel vs. G8 Education | Vulcan Steel vs. BSP Financial Group | Vulcan Steel vs. Prime Financial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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