Correlation Between Mineral Resources and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both Mineral Resources and Fortescue 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 Mineral Resources and Fortescue Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mineral Resources Limited and Fortescue Metals Group, you can compare the effects of market volatilities on Mineral Resources and Fortescue 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 Mineral Resources with a short position of Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mineral Resources and Fortescue Metals.
Diversification Opportunities for Mineral Resources and Fortescue Metals
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mineral and Fortescue is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Mineral Resources Limited and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals and Mineral Resources 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 Mineral Resources Limited are associated (or correlated) with Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of Mineral Resources i.e., Mineral Resources and Fortescue Metals go up and down completely randomly.
Pair Corralation between Mineral Resources and Fortescue Metals
Assuming the 90 days horizon Mineral Resources Limited is expected to under-perform the Fortescue Metals. In addition to that, Mineral Resources is 1.41 times more volatile than Fortescue Metals Group. It trades about -0.1 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about -0.08 per unit of volatility. If you would invest 1,285 in Fortescue Metals Group on September 3, 2024 and sell it today you would lose (55.00) from holding Fortescue Metals Group or give up 4.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mineral Resources Limited vs. Fortescue Metals Group
Performance |
| Timeline |
| Mineral Resources |
| Fortescue Metals |
Mineral Resources and Fortescue Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mineral Resources and Fortescue Metals
The main advantage of trading using opposite Mineral Resources and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mineral Resources position performs unexpectedly, Fortescue 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.| Mineral Resources vs. IGO Limited | Mineral Resources vs. Qubec Nickel Corp | Mineral Resources vs. Nickel Mines Limited | Mineral Resources vs. Surge Copper Corp |
| Fortescue Metals vs. IGO Limited | Fortescue Metals vs. Qubec Nickel Corp | Fortescue Metals vs. Nickel Mines Limited | Fortescue Metals vs. Mineral Resources Limited |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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