Correlation Between FC Investment and Empire Metals

Can any of the company-specific risk be diversified away by investing in both FC Investment and Empire 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 FC Investment and Empire Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FC Investment Trust and Empire Metals Limited, you can compare the effects of market volatilities on FC Investment and Empire 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 FC Investment with a short position of Empire Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of FC Investment and Empire Metals.

Diversification Opportunities for FC Investment and Empire Metals

-0.7

Correlation Coefficient

FC Investment  Empire Metals

Excellent diversification

The 3 months correlation between FCIT and Empire is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding FC Investment Trust and Empire Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empire Metals Limited and FC Investment 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 FC Investment Trust are associated (or correlated) with Empire Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empire Metals Limited has no effect on the direction of FC Investment i.e., FC Investment and Empire Metals go up and down completely randomly.

Pair Corralation between FC Investment and Empire Metals

Assuming the 90 days trading horizon FC Investment Trust is expected to generate 0.22 times more return on investment than Empire Metals. However, FC Investment Trust is 4.62 times less risky than Empire Metals. It trades about 0.19 of its potential returns per unit of risk. Empire Metals Limited is currently generating about -0.08 per unit of risk. If you would invest  103,796  in FC Investment Trust on September 19, 2024 and sell it today you would earn a total of  8,404  from holding FC Investment Trust or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FC Investment Trust  vs.  Empire Metals Limited

FC Investment Trust

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FC Investment Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, FC Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Empire Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Empire Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with FC Investment and Empire Metals

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

The idea behind FC Investment Trust and Empire Metals Limited 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.