Correlation Between Armada Mercantile and APAC Resources

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

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

Diversification Opportunities for Armada Mercantile and APAC Resources

-0.6

Correlation Coefficient

Armada Mercantile  APAC Resources

Excellent diversification

The 3 months correlation between Armada and APAC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Armada Mercantile and APAC Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APAC Resources and Armada Mercantile 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 Armada Mercantile are associated (or correlated) with APAC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APAC Resources has no effect on the direction of Armada Mercantile i.e., Armada Mercantile and APAC Resources go up and down completely randomly.

Pair Corralation between Armada Mercantile and APAC Resources

Assuming the 90 days horizon Armada Mercantile is expected to under-perform the APAC Resources. In addition to that, Armada Mercantile is 3.25 times more volatile than APAC Resources Limited. It trades about -0.05 of its total potential returns per unit of risk. APAC Resources Limited is currently generating about 0.13 per unit of volatility. If you would invest  10.00  in APAC Resources Limited on August 30, 2024 and sell it today you would earn a total of  1.00  from holding APAC Resources Limited or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.63%
Values	Daily Returns

Armada Mercantile  vs.  APAC Resources Limited

Armada Mercantile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Mercantile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

APAC Resources

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days APAC Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly conflicting fundamental indicators, APAC Resources may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Armada Mercantile and APAC Resources

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

The idea behind Armada Mercantile and APAC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.