Correlation Between CDN Maverick and Arafura Resources

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

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

Diversification Opportunities for CDN Maverick and Arafura Resources

-0.49

Correlation Coefficient

CDN Maverick  Arafura Resources

Very good diversification

The 3 months correlation between CDN and Arafura is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CDN Maverick Capital and Arafura Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arafura Resources and CDN Maverick 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 CDN Maverick Capital are associated (or correlated) with Arafura Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arafura Resources has no effect on the direction of CDN Maverick i.e., CDN Maverick and Arafura Resources go up and down completely randomly.

Pair Corralation between CDN Maverick and Arafura Resources

Assuming the 90 days horizon CDN Maverick Capital is expected to generate 1.22 times more return on investment than Arafura Resources. However, CDN Maverick is 1.22 times more volatile than Arafura Resources. It trades about 0.12 of its potential returns per unit of risk. Arafura Resources is currently generating about -0.09 per unit of risk. If you would invest  8.37  in CDN Maverick Capital on September 4, 2024 and sell it today you would earn a total of  2.63  from holding CDN Maverick Capital or generate 31.42% return on investment over 90 days.

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

CDN Maverick Capital  vs.  Arafura Resources

CDN Maverick Capital

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDN Maverick Capital are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, CDN Maverick reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with CDN Maverick and Arafura Resources

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

The idea behind CDN Maverick Capital and Arafura 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.