Correlation Between Arafura Resources and Grizzly Discoveries

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

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

Diversification Opportunities for Arafura Resources and Grizzly Discoveries

0.09

Correlation Coefficient

Arafura Resources  Grizzly Discoveries

Significant diversification

The 3 months correlation between Arafura and Grizzly is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Grizzly Discoveries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grizzly Discoveries 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 Grizzly Discoveries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grizzly Discoveries has no effect on the direction of Arafura Resources i.e., Arafura Resources and Grizzly Discoveries go up and down completely randomly.

Pair Corralation between Arafura Resources and Grizzly Discoveries

Assuming the 90 days horizon Arafura Resources is expected to generate 1.81 times more return on investment than Grizzly Discoveries. However, Arafura Resources is 1.81 times more volatile than Grizzly Discoveries. It trades about -0.02 of its potential returns per unit of risk. Grizzly Discoveries is currently generating about -0.1 per unit of risk. If you would invest  10.00  in Arafura Resources on September 14, 2024 and sell it today you would lose (2.00) from holding Arafura Resources or give up 20.0% of portfolio value over 90 days.

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

Arafura Resources  vs.  Grizzly Discoveries

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 latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Grizzly Discoveries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grizzly Discoveries 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 forward 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.

Pair Trading with Arafura Resources and Grizzly Discoveries

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

The idea behind Arafura Resources and Grizzly Discoveries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.