Correlation Between InPlay Oil and Arizona Gold

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

By analyzing existing cross correlation between InPlay Oil Corp and Arizona Gold Silver, you can compare the effects of market volatilities on InPlay Oil and Arizona Gold 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 InPlay Oil with a short position of Arizona Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and Arizona Gold.

Diversification Opportunities for InPlay Oil and Arizona Gold

-0.51

Correlation Coefficient

InPlay Oil  Arizona Gold

Excellent diversification

The 3 months correlation between InPlay and Arizona is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil Corp and Arizona Gold Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Gold Silver and InPlay Oil 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 InPlay Oil Corp are associated (or correlated) with Arizona Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Gold Silver has no effect on the direction of InPlay Oil i.e., InPlay Oil and Arizona Gold go up and down completely randomly.

Pair Corralation between InPlay Oil and Arizona Gold

Assuming the 90 days trading horizon InPlay Oil Corp is expected to under-perform the Arizona Gold. But the stock apears to be less risky and, when comparing its historical volatility, InPlay Oil Corp is 1.79 times less risky than Arizona Gold. The stock trades about -0.3 of its potential returns per unit of risk. The Arizona Gold Silver is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  41.00  in Arizona Gold Silver on September 26, 2024 and sell it today you would earn a total of  9.00  from holding Arizona Gold Silver or generate 21.95% return on investment over 90 days.

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

InPlay Oil Corp  vs.  Arizona Gold Silver

InPlay Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InPlay Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Arizona Gold Silver

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Gold Silver are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Arizona Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InPlay Oil and Arizona Gold

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

The idea behind InPlay Oil Corp and Arizona Gold Silver 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.