Correlation Between Future Metals and Empire Metals
Can any of the company-specific risk be diversified away by investing in both Future Metals and Empire Metals 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 Empire Metals 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 Empire Metals Limited, you can compare the effects of market volatilities on Future Metals and Empire Metals 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 Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Future Metals and Empire Metals.
Diversification Opportunities for Future Metals and Empire Metals
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Future and Empire is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited 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 Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of Future Metals i.e., Future Metals and Empire Metals go up and down completely randomly.
Pair Corralation between Future Metals and Empire Metals
Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Empire Metals. But the stock apears to be less risky and, when comparing its historical volatility, Future Metals NL is 1.05 times less risky than Empire Metals. The stock trades about -0.02 of its potential returns per unit of risk. The Empire Metals Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 183.00 in Empire Metals Limited on September 1, 2024 and sell it today you would earn a total of 377.00 from holding Empire Metals Limited or generate 206.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Future Metals NL vs. Empire Metals Limited
Performance |
| Timeline |
| Future Metals NL |
| Empire Metals Limited |
Future Metals and Empire Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Future Metals and Empire Metals
The main advantage of trading using opposite Future Metals and Empire Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Metals position performs unexpectedly, Empire Metals 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 Empire Metals will offset losses from the drop in Empire Metals' long position.| Future Metals vs. Givaudan SA | Future Metals vs. Antofagasta PLC | Future Metals vs. Centamin PLC | Future Metals vs. Atalaya Mining |
| Empire Metals vs. Givaudan SA | Empire Metals vs. Antofagasta PLC | Empire Metals vs. Centamin PLC | Empire Metals vs. Atalaya Mining |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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