Correlation Between FIREWEED METALS and Monument Mining
Can any of the company-specific risk be diversified away by investing in both FIREWEED METALS and Monument Mining 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 FIREWEED METALS and Monument Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIREWEED METALS P and Monument Mining Limited, you can compare the effects of market volatilities on FIREWEED METALS and Monument Mining 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 FIREWEED METALS with a short position of Monument Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIREWEED METALS and Monument Mining.
Diversification Opportunities for FIREWEED METALS and Monument Mining
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FIREWEED and Monument is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding FIREWEED METALS P and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining and FIREWEED 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 FIREWEED METALS P are associated (or correlated) with Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of FIREWEED METALS i.e., FIREWEED METALS and Monument Mining go up and down completely randomly.
Pair Corralation between FIREWEED METALS and Monument Mining
Assuming the 90 days horizon FIREWEED METALS P is expected to under-perform the Monument Mining. But the stock apears to be less risky and, when comparing its historical volatility, FIREWEED METALS P is 2.76 times less risky than Monument Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Monument Mining Limited is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Monument Mining Limited on November 7, 2024 and sell it today you would earn a total of 3.00 from holding Monument Mining Limited or generate 15.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.3% |
| Values | Daily Returns |
FIREWEED METALS P vs. Monument Mining Limited
Performance |
| Timeline |
| FIREWEED METALS P |
| Monument Mining |
FIREWEED METALS and Monument Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FIREWEED METALS and Monument Mining
The main advantage of trading using opposite FIREWEED METALS and Monument Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIREWEED METALS position performs unexpectedly, Monument Mining 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 Monument Mining will offset losses from the drop in Monument Mining's long position.| FIREWEED METALS vs. Rio Tinto Group | FIREWEED METALS vs. Anglo American plc | FIREWEED METALS vs. Mineral Resources Limited | FIREWEED METALS vs. Liontown Resources Limited |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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