Correlation Between Future Metals and Overstock
Can any of the company-specific risk be diversified away by investing in both Future Metals and Overstock 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 Future Metals and Overstock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Future Metals NL and Overstock, you can compare the effects of market volatilities on Future Metals and Overstock 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 Future Metals with a short position of Overstock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Metals and Overstock.
Diversification Opportunities for Future Metals and Overstock
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Future and Overstock is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and Overstock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Overstock and Future 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 Future Metals NL are associated (or correlated) with Overstock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Overstock has no effect on the direction of Future Metals i.e., Future Metals and Overstock go up and down completely randomly.
Pair Corralation between Future Metals and Overstock
Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Overstock. But the stock apears to be less risky and, when comparing its historical volatility, Future Metals NL is 1.17 times less risky than Overstock. The stock trades about -0.3 of its potential returns per unit of risk. The Overstock is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 654.00 in Overstock on September 1, 2024 and sell it today you would lose (44.00) from holding Overstock or give up 6.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Future Metals NL vs. Overstock
Performance |
| Timeline |
| Future Metals NL |
| Overstock |
Future Metals and Overstock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Future Metals and Overstock
The main advantage of trading using opposite Future Metals and Overstock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Metals position performs unexpectedly, Overstock 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 Overstock will offset losses from the drop in Overstock's long position.| Future Metals vs. Givaudan SA | Future Metals vs. Antofagasta PLC | Future Metals vs. Centamin PLC | Future Metals vs. Atalaya Mining |
| Overstock vs. Jacquet Metal Service | Overstock vs. Fulcrum Metals PLC | Overstock vs. GreenX Metals | Overstock vs. Future Metals NL |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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