Correlation Between American Clean and Capella Minerals

Can any of the company-specific risk be diversified away by investing in both American Clean and Capella Minerals 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 American Clean and Capella Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for American Clean and Capella Minerals

0.63

Correlation Coefficient

American Clean  Capella Minerals

Poor diversification

The 3 months correlation between American and Capella is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Clean Resources and Capella Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capella Minerals and American Clean 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 American Clean Resources are associated (or correlated) with Capella Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capella Minerals has no effect on the direction of American Clean i.e., American Clean and Capella Minerals go up and down completely randomly.

Pair Corralation between American Clean and Capella Minerals

Given the investment horizon of 90 days American Clean Resources is expected to generate 0.97 times more return on investment than Capella Minerals. However, American Clean Resources is 1.03 times less risky than Capella Minerals. It trades about 0.0 of its potential returns per unit of risk. Capella Minerals Limited is currently generating about -0.02 per unit of risk. If you would invest  900.00  in American Clean Resources on September 4, 2024 and sell it today you would lose (395.00) from holding American Clean Resources or give up 43.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

American Clean Resources  vs.  Capella Minerals Limited

American Clean Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Clean Resources 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Capella Minerals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capella Minerals Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Capella Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Clean and Capella Minerals

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

The idea behind American Clean Resources and Capella Minerals 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.