Correlation Between Clean Air and Astra Exploration

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

By analyzing existing cross correlation between Clean Air Metals and Astra Exploration, you can compare the effects of market volatilities on Clean Air and Astra Exploration 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 Clean Air with a short position of Astra Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Air and Astra Exploration.

Diversification Opportunities for Clean Air and Astra Exploration

-0.4

Correlation Coefficient

Clean Air  Astra Exploration

Very good diversification

The 3 months correlation between Clean and Astra is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Clean Air Metals and Astra Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Exploration and Clean Air 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 Clean Air Metals are associated (or correlated) with Astra Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Exploration has no effect on the direction of Clean Air i.e., Clean Air and Astra Exploration go up and down completely randomly.

Pair Corralation between Clean Air and Astra Exploration

Assuming the 90 days horizon Clean Air Metals is expected to under-perform the Astra Exploration. But the stock apears to be less risky and, when comparing its historical volatility, Clean Air Metals is 1.06 times less risky than Astra Exploration. The stock trades about -0.02 of its potential returns per unit of risk. The Astra Exploration is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Astra Exploration on September 12, 2024 and sell it today you would earn a total of  6.00  from holding Astra Exploration or generate 75.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Clean Air Metals  vs.  Astra Exploration

Clean Air Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Air Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Astra Exploration

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Exploration are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Astra Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clean Air and Astra Exploration

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

The idea behind Clean Air Metals and Astra Exploration 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 Global Correlations module to find global opportunities by holding instruments from different markets.