Correlation Between G6 Materials and 5E Advanced

Can any of the company-specific risk be diversified away by investing in both G6 Materials and 5E Advanced 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 G6 Materials and 5E Advanced into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G6 Materials Corp and 5E Advanced Materials, you can compare the effects of market volatilities on G6 Materials and 5E Advanced 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 G6 Materials with a short position of 5E Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of G6 Materials and 5E Advanced.

Diversification Opportunities for G6 Materials and 5E Advanced

0.17

Correlation Coefficient

G6 Materials  5E Advanced

Average diversification

The 3 months correlation between GPHBF and FEAM is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding G6 Materials Corp and 5E Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5E Advanced Materials and G6 Materials 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 G6 Materials Corp are associated (or correlated) with 5E Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5E Advanced Materials has no effect on the direction of G6 Materials i.e., G6 Materials and 5E Advanced go up and down completely randomly.

Pair Corralation between G6 Materials and 5E Advanced

Assuming the 90 days horizon G6 Materials Corp is expected to under-perform the 5E Advanced. In addition to that, G6 Materials is 2.18 times more volatile than 5E Advanced Materials. It trades about -0.01 of its total potential returns per unit of risk. 5E Advanced Materials is currently generating about 0.0 per unit of volatility. If you would invest  50.00  in 5E Advanced Materials on September 12, 2024 and sell it today you would lose (5.00) from holding 5E Advanced Materials or give up 10.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

G6 Materials Corp  vs.  5E Advanced Materials

G6 Materials Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G6 Materials Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

5E Advanced Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 5E Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, 5E Advanced is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with G6 Materials and 5E Advanced

The main advantage of trading using opposite G6 Materials and 5E Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G6 Materials position performs unexpectedly, 5E Advanced 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 5E Advanced will offset losses from the drop in 5E Advanced's long position.

The idea behind G6 Materials Corp and 5E Advanced Materials 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.