Correlation Between Arctic Star and Diamond Fields

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

By analyzing existing cross correlation between Arctic Star Exploration and Diamond Fields Resources, you can compare the effects of market volatilities on Arctic Star and Diamond Fields 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 Arctic Star with a short position of Diamond Fields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arctic Star and Diamond Fields.

Diversification Opportunities for Arctic Star and Diamond Fields

0.03

Correlation Coefficient

Arctic Star  Diamond Fields

Significant diversification

The 3 months correlation between Arctic and Diamond is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and Diamond Fields Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Fields Resources and Arctic Star 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 Arctic Star Exploration are associated (or correlated) with Diamond Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Fields Resources has no effect on the direction of Arctic Star i.e., Arctic Star and Diamond Fields go up and down completely randomly.

Pair Corralation between Arctic Star and Diamond Fields

Assuming the 90 days horizon Arctic Star Exploration is expected to under-perform the Diamond Fields. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arctic Star Exploration is 5.98 times less risky than Diamond Fields. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Diamond Fields Resources is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2.01  in Diamond Fields Resources on September 14, 2024 and sell it today you would lose (0.40) from holding Diamond Fields Resources or give up 19.9% of portfolio value over 90 days.

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

Arctic Star Exploration  vs.  Diamond Fields Resources

Arctic Star Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Star Exploration 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 basic 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.

Diamond Fields Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Diamond Fields Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical and fundamental indicators, Diamond Fields reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arctic Star and Diamond Fields

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

The idea behind Arctic Star Exploration and Diamond Fields Resources 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.