Correlation Between Warrior Met and American Resources

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

By analyzing existing cross correlation between Warrior Met Coal and American Resources Corp, you can compare the effects of market volatilities on Warrior Met and American 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 Warrior Met with a short position of American Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warrior Met and American Resources.

Diversification Opportunities for Warrior Met and American Resources

0.8

Correlation Coefficient

Warrior Met  American Resources

Very poor diversification

The 3 months correlation between Warrior and American is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Warrior Met Coal and American Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Resources Corp and Warrior Met 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 Warrior Met Coal are associated (or correlated) with American Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Resources Corp has no effect on the direction of Warrior Met i.e., Warrior Met and American Resources go up and down completely randomly.

Pair Corralation between Warrior Met and American Resources

Considering the 90-day investment horizon Warrior Met is expected to generate 4.86 times less return on investment than American Resources. But when comparing it to its historical volatility, Warrior Met Coal is 2.11 times less risky than American Resources. It trades about 0.12 of its potential returns per unit of risk. American Resources Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  49.00  in American Resources Corp on September 12, 2024 and sell it today you would earn a total of  72.00  from holding American Resources Corp or generate 146.94% return on investment over 90 days.

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

Warrior Met Coal  vs.  American Resources Corp

Warrior Met Coal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warrior Met Coal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Warrior Met exhibited solid returns over the last few months and may actually be approaching a breakup point.

American Resources Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Resources Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, American Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Warrior Met and American Resources

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

The idea behind Warrior Met Coal and American Resources Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.