Correlation Between Ice Fish and Arctic Fish

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

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

Diversification Opportunities for Ice Fish and Arctic Fish

0.74

Correlation Coefficient

Ice Fish  Arctic Fish

Poor diversification

The 3 months correlation between Ice and Arctic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ice Fish Farm and Arctic Fish Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Fish Holding and Ice Fish 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 Ice Fish Farm are associated (or correlated) with Arctic Fish. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Fish Holding has no effect on the direction of Ice Fish i.e., Ice Fish and Arctic Fish go up and down completely randomly.

Pair Corralation between Ice Fish and Arctic Fish

Assuming the 90 days trading horizon Ice Fish Farm is expected to generate 1.32 times more return on investment than Arctic Fish. However, Ice Fish is 1.32 times more volatile than Arctic Fish Holding. It trades about 0.1 of its potential returns per unit of risk. Arctic Fish Holding is currently generating about 0.06 per unit of risk. If you would invest  2,700  in Ice Fish Farm on September 14, 2024 and sell it today you would earn a total of  200.00  from holding Ice Fish Farm or generate 7.41% return on investment over 90 days.

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

Ice Fish Farm  vs.  Arctic Fish Holding

Ice Fish Farm

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ice Fish Farm are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Ice Fish displayed solid returns over the last few months and may actually be approaching a breakup point.

Arctic Fish Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Fish Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Arctic Fish displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ice Fish and Arctic Fish

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

The idea behind Ice Fish Farm and Arctic Fish Holding 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.