Correlation Between Arafura Resources and Boliden AB

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

By analyzing existing cross correlation between Arafura Resources and Boliden AB ADR, you can compare the effects of market volatilities on Arafura Resources and Boliden AB 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 Boliden AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Boliden AB.

Diversification Opportunities for Arafura Resources and Boliden AB

0.3

Correlation Coefficient

Arafura Resources  Boliden AB

Weak diversification

The 3 months correlation between Arafura and Boliden is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Boliden AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boliden AB ADR 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 Boliden AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boliden AB ADR has no effect on the direction of Arafura Resources i.e., Arafura Resources and Boliden AB go up and down completely randomly.

Pair Corralation between Arafura Resources and Boliden AB

Assuming the 90 days horizon Arafura Resources is expected to under-perform the Boliden AB. In addition to that, Arafura Resources is 3.18 times more volatile than Boliden AB ADR. It trades about 0.0 of its total potential returns per unit of risk. Boliden AB ADR is currently generating about 0.07 per unit of volatility. If you would invest  5,696  in Boliden AB ADR on September 5, 2024 and sell it today you would earn a total of  484.00  from holding Boliden AB ADR or generate 8.5% return on investment over 90 days.

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

Arafura Resources  vs.  Boliden AB ADR

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 nearly stable technical and fundamental indicators, Arafura Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Boliden AB ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Boliden AB ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Boliden AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arafura Resources and Boliden AB

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

The idea behind Arafura Resources and Boliden AB ADR 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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.