Correlation Between Transatlantic Mining and Finlay Minerals
Can any of the company-specific risk be diversified away by investing in both Transatlantic Mining and Finlay Minerals 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 Transatlantic Mining and Finlay Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transatlantic Mining Corp and Finlay Minerals, you can compare the effects of market volatilities on Transatlantic Mining and Finlay Minerals 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 Transatlantic Mining with a short position of Finlay Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transatlantic Mining and Finlay Minerals.
Diversification Opportunities for Transatlantic Mining and Finlay Minerals
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Transatlantic and Finlay is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Transatlantic Mining Corp and Finlay Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finlay Minerals and Transatlantic Mining 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 Transatlantic Mining Corp are associated (or correlated) with Finlay Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finlay Minerals has no effect on the direction of Transatlantic Mining i.e., Transatlantic Mining and Finlay Minerals go up and down completely randomly.
Pair Corralation between Transatlantic Mining and Finlay Minerals
Assuming the 90 days horizon Transatlantic Mining Corp is expected to generate 0.95 times more return on investment than Finlay Minerals. However, Transatlantic Mining Corp is 1.05 times less risky than Finlay Minerals. It trades about 0.08 of its potential returns per unit of risk. Finlay Minerals is currently generating about 0.04 per unit of risk. If you would invest 2.00 in Transatlantic Mining Corp on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Transatlantic Mining Corp or generate 450.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Transatlantic Mining Corp vs. Finlay Minerals
Performance |
| Timeline |
| Transatlantic Mining Corp |
| Finlay Minerals |
Transatlantic Mining and Finlay Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transatlantic Mining and Finlay Minerals
The main advantage of trading using opposite Transatlantic Mining and Finlay Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transatlantic Mining position performs unexpectedly, Finlay Minerals 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 Finlay Minerals will offset losses from the drop in Finlay Minerals' long position.The idea behind Transatlantic Mining Corp and Finlay Minerals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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