Correlation Between Affiliated Resources and Tower Resources

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

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

Diversification Opportunities for Affiliated Resources and Tower Resources

-0.49

Correlation Coefficient

Affiliated Resources  Tower Resources

Very good diversification

The 3 months correlation between Affiliated and Tower is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Resources Corp and Tower Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Resources and Affiliated 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 Affiliated Resources Corp are associated (or correlated) with Tower Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Resources has no effect on the direction of Affiliated Resources i.e., Affiliated Resources and Tower Resources go up and down completely randomly.

Pair Corralation between Affiliated Resources and Tower Resources

Given the investment horizon of 90 days Affiliated Resources Corp is expected to under-perform the Tower Resources. In addition to that, Affiliated Resources is 1.45 times more volatile than Tower Resources. It trades about 0.0 of its total potential returns per unit of risk. Tower Resources is currently generating about 0.12 per unit of volatility. If you would invest  6.59  in Tower Resources on September 5, 2024 and sell it today you would earn a total of  2.51  from holding Tower Resources or generate 38.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Affiliated Resources Corp  vs.  Tower Resources

Affiliated Resources Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Affiliated Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Affiliated Resources is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Tower Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tower Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Tower Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affiliated Resources and Tower Resources

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

The idea behind Affiliated Resources Corp and Tower Resources 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.