Correlation Between Arizona Metals and Kiplin Metals

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

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

Diversification Opportunities for Arizona Metals and Kiplin Metals

-0.55

Correlation Coefficient

Arizona Metals  Kiplin Metals

Excellent diversification

The 3 months correlation between Arizona and Kiplin is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Metals Corp and Kiplin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kiplin Metals and Arizona Metals 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 Arizona Metals Corp are associated (or correlated) with Kiplin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kiplin Metals has no effect on the direction of Arizona Metals i.e., Arizona Metals and Kiplin Metals go up and down completely randomly.

Pair Corralation between Arizona Metals and Kiplin Metals

Assuming the 90 days trading horizon Arizona Metals is expected to generate 1.32 times less return on investment than Kiplin Metals. But when comparing it to its historical volatility, Arizona Metals Corp is 1.69 times less risky than Kiplin Metals. It trades about 0.05 of its potential returns per unit of risk. Kiplin Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Kiplin Metals on September 3, 2024 and sell it today you would earn a total of  0.00  from holding Kiplin Metals or generate 0.0% return on investment over 90 days.

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

Arizona Metals Corp  vs.  Kiplin Metals

Arizona Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Arizona Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Kiplin Metals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kiplin Metals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Kiplin Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Metals and Kiplin Metals

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

The idea behind Arizona Metals Corp and Kiplin Metals 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.