Correlation Between Tarku Resources and Arizona Metals

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

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

Diversification Opportunities for Tarku Resources and Arizona Metals

0.31

Correlation Coefficient

Tarku Resources  Arizona Metals

Weak diversification

The 3 months correlation between Tarku and Arizona is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tarku Resources and Arizona Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Metals Corp and Tarku Resources 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 Tarku Resources are associated (or correlated) with Arizona Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Metals Corp has no effect on the direction of Tarku Resources i.e., Tarku Resources and Arizona Metals go up and down completely randomly.

Pair Corralation between Tarku Resources and Arizona Metals

Assuming the 90 days horizon Tarku Resources is expected to generate 6.74 times more return on investment than Arizona Metals. However, Tarku Resources is 6.74 times more volatile than Arizona Metals Corp. It trades about 0.08 of its potential returns per unit of risk. Arizona Metals Corp is currently generating about 0.05 per unit of risk. If you would invest  1.33  in Tarku Resources on September 3, 2024 and sell it today you would lose (0.79) from holding Tarku Resources or give up 59.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Tarku Resources  vs.  Arizona Metals Corp

Tarku Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tarku Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tarku Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Arizona Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Arizona Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tarku Resources and Arizona Metals

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

The idea behind Tarku Resources and Arizona Metals 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.