Correlation Between Arafura Resources and CDN Maverick

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

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

Diversification Opportunities for Arafura Resources and CDN Maverick

-0.34

Correlation Coefficient

Arafura Resources  CDN Maverick

Very good diversification

The 3 months correlation between Arafura and CDN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and CDN Maverick Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDN Maverick Capital and Arafura 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 Arafura Resources are associated (or correlated) with CDN Maverick. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDN Maverick Capital has no effect on the direction of Arafura Resources i.e., Arafura Resources and CDN Maverick go up and down completely randomly.

Pair Corralation between Arafura Resources and CDN Maverick

Assuming the 90 days horizon Arafura Resources is expected to under-perform the CDN Maverick. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arafura Resources is 1.1 times less risky than CDN Maverick. The pink sheet trades about -0.07 of its potential returns per unit of risk. The CDN Maverick Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.92  in CDN Maverick Capital on September 12, 2024 and sell it today you would lose (1.25) from holding CDN Maverick Capital or give up 15.78% of portfolio value over 90 days.

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

Arafura Resources  vs.  CDN Maverick Capital

Arafura Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arafura 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 technical and fundamental 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.

CDN Maverick Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDN Maverick Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CDN Maverick is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arafura Resources and CDN Maverick

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

The idea behind Arafura Resources and CDN Maverick Capital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.