Correlation Between Atacama Resources and Ultrack Systems

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

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

Diversification Opportunities for Atacama Resources and Ultrack Systems

0.15

Correlation Coefficient

Atacama Resources  Ultrack Systems

Average diversification

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

Pair Corralation between Atacama Resources and Ultrack Systems

Given the investment horizon of 90 days Atacama Resources is expected to generate 26.38 times less return on investment than Ultrack Systems. But when comparing it to its historical volatility, Atacama Resources International is 7.84 times less risky than Ultrack Systems. It trades about 0.05 of its potential returns per unit of risk. Ultrack Systems is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.02  in Ultrack Systems on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Ultrack Systems or generate 0.0% return on investment over 90 days.

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

Atacama Resources Internationa  vs.  Ultrack Systems

Atacama Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atacama Resources International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Atacama Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ultrack Systems

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrack Systems are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating essential indicators, Ultrack Systems sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Atacama Resources and Ultrack Systems

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

The idea behind Atacama Resources International and Ultrack Systems 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.