Correlation Between Faraday Copper and Nevado Resources

Can any of the company-specific risk be diversified away by investing in both Faraday Copper and Nevado 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 Faraday Copper and Nevado Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Faraday Copper Corp and Nevado Resources, you can compare the effects of market volatilities on Faraday Copper and Nevado 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 Faraday Copper with a short position of Nevado Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Faraday Copper and Nevado Resources.

Diversification Opportunities for Faraday Copper and Nevado Resources

0.72

Correlation Coefficient

Faraday Copper  Nevado Resources

Poor diversification

The 3 months correlation between Faraday and Nevado is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp and Nevado Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevado Resources and Faraday Copper 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 Faraday Copper Corp are associated (or correlated) with Nevado Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevado Resources has no effect on the direction of Faraday Copper i.e., Faraday Copper and Nevado Resources go up and down completely randomly.

Pair Corralation between Faraday Copper and Nevado Resources

Assuming the 90 days trading horizon Faraday Copper Corp is expected to generate 1.03 times more return on investment than Nevado Resources. However, Faraday Copper is 1.03 times more volatile than Nevado Resources. It trades about 0.02 of its potential returns per unit of risk. Nevado Resources is currently generating about 0.0 per unit of risk. If you would invest  83.00  in Faraday Copper Corp on February 26, 2024 and sell it today you would lose (1.00) from holding Faraday Copper Corp or give up 1.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Faraday Copper Corp  vs.  Nevado Resources

Faraday Copper Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Faraday Copper displayed solid returns over the last few months and may actually be approaching a breakup point.

Nevado Resources

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nevado Resources are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical indicators, Nevado Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faraday Copper and Nevado Resources

The main advantage of trading using opposite Faraday Copper and Nevado Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper position performs unexpectedly, Nevado 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 Nevado Resources will offset losses from the drop in Nevado Resources' long position.

The idea behind Faraday Copper Corp and Nevado Resources 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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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.