Correlation Between Focus Graphite and Mineral Resources

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

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

Diversification Opportunities for Focus Graphite and Mineral Resources

0.15

Correlation Coefficient

Focus Graphite  Mineral Resources

Average diversification

The 3 months correlation between Focus and Mineral is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite and Mineral Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Resources and Focus Graphite 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 Focus Graphite are associated (or correlated) with Mineral Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Resources has no effect on the direction of Focus Graphite i.e., Focus Graphite and Mineral Resources go up and down completely randomly.

Pair Corralation between Focus Graphite and Mineral Resources

Assuming the 90 days horizon Focus Graphite is expected to generate 1.65 times more return on investment than Mineral Resources. However, Focus Graphite is 1.65 times more volatile than Mineral Resources Limited. It trades about 0.0 of its potential returns per unit of risk. Mineral Resources Limited is currently generating about -0.04 per unit of risk. If you would invest  17.00  in Focus Graphite on September 12, 2024 and sell it today you would lose (10.80) from holding Focus Graphite or give up 63.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.58%
Values	Daily Returns

Focus Graphite  vs.  Mineral Resources Limited

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Focus Graphite is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Mineral Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mineral Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mineral Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Focus Graphite and Mineral Resources

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

The idea behind Focus Graphite and Mineral Resources 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.