Correlation Between Fortescue Metals and Bitterroot Resources
Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and Bitterroot 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 Fortescue Metals and Bitterroot Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortescue Metals Group and Bitterroot Resources, you can compare the effects of market volatilities on Fortescue Metals and Bitterroot 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 Fortescue Metals with a short position of Bitterroot Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and Bitterroot Resources.
Diversification Opportunities for Fortescue Metals and Bitterroot Resources
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Fortescue and Bitterroot is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and Bitterroot Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitterroot Resources and Fortescue 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 Fortescue Metals Group are associated (or correlated) with Bitterroot Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitterroot Resources has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and Bitterroot Resources go up and down completely randomly.
Pair Corralation between Fortescue Metals and Bitterroot Resources
Assuming the 90 days horizon Fortescue Metals is expected to generate 19.91 times less return on investment than Bitterroot Resources. But when comparing it to its historical volatility, Fortescue Metals Group is 5.74 times less risky than Bitterroot Resources. It trades about 0.02 of its potential returns per unit of risk. Bitterroot Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2.83 in Bitterroot Resources on August 29, 2024 and sell it today you would earn a total of 0.17 from holding Bitterroot Resources or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortescue Metals Group vs. Bitterroot Resources
Performance |
| Timeline |
| Fortescue Metals |
| Bitterroot Resources |
Fortescue Metals and Bitterroot Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortescue Metals and Bitterroot Resources
The main advantage of trading using opposite Fortescue Metals and Bitterroot Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortescue Metals position performs unexpectedly, Bitterroot 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 Bitterroot Resources will offset losses from the drop in Bitterroot Resources' long position.| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Hannan Metals |
| Bitterroot Resources vs. Golden Lake Exploration | Bitterroot Resources vs. Transition Metals Corp | Bitterroot Resources vs. Vendetta Mining Corp | Bitterroot Resources vs. Bayhorse Silver |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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