Correlation Between Equity Metals and Arctic Star

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

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

Diversification Opportunities for Equity Metals and Arctic Star

-0.19

Correlation Coefficient

Equity Metals  Arctic Star

Good diversification

The 3 months correlation between Equity and Arctic is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Equity Metals 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 Equity Metals 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 Equity Metals 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 Equity Metals i.e., Equity Metals and Arctic Star go up and down completely randomly.

Pair Corralation between Equity Metals and Arctic Star

Assuming the 90 days horizon Equity Metals is expected to generate 1.85 times more return on investment than Arctic Star. However, Equity Metals is 1.85 times more volatile than Arctic Star Exploration. It trades about 0.02 of its potential returns per unit of risk. Arctic Star Exploration is currently generating about -0.06 per unit of risk. If you would invest  14.00  in Equity Metals on September 2, 2024 and sell it today you would lose (1.00) from holding Equity Metals or give up 7.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Equity Metals  vs.  Arctic Star Exploration

Equity Metals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Equity Metals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 weak 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.

Pair Trading with Equity Metals and Arctic Star

The main advantage of trading using opposite Equity Metals and Arctic Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Metals 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 Equity Metals 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.