Correlation Between Compania and Arctic Star

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

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

Diversification Opportunities for Compania and Arctic Star

-0.22

Correlation Coefficient

Compania  Arctic Star

Very good diversification

The 3 months correlation between Compania and Arctic is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and Arctic Star Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Star Exploration and Compania 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 Compania de Minas are associated (or correlated) with Arctic Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Star Exploration has no effect on the direction of Compania i.e., Compania and Arctic Star go up and down completely randomly.

Pair Corralation between Compania and Arctic Star

Considering the 90-day investment horizon Compania de Minas is expected to generate 0.56 times more return on investment than Arctic Star. However, Compania de Minas is 1.8 times less risky than Arctic Star. It trades about 0.03 of its potential returns per unit of risk. Arctic Star Exploration is currently generating about -0.05 per unit of risk. If you would invest  1,251  in Compania de Minas on September 12, 2024 and sell it today you would earn a total of  27.00  from holding Compania de Minas or generate 2.16% return on investment over 90 days.

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

Compania de Minas  vs.  Arctic Star Exploration

Compania de Minas

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Compania de Minas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Compania is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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

Pair Trading with Compania and Arctic Star

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

The idea behind Compania de Minas and Arctic Star Exploration 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.

Check out your portfolio center.

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.