Correlation Between American Creek and Aurania Resources

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

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

Diversification Opportunities for American Creek and Aurania Resources

0.16

Correlation Coefficient

American Creek  Aurania Resources

Average diversification

The 3 months correlation between American and Aurania is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Creek Resources and Aurania Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurania Resources and American Creek 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 American Creek Resources are associated (or correlated) with Aurania Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurania Resources has no effect on the direction of American Creek i.e., American Creek and Aurania Resources go up and down completely randomly.

Pair Corralation between American Creek and Aurania Resources

Assuming the 90 days horizon American Creek Resources is expected to under-perform the Aurania Resources. But the otc stock apears to be less risky and, when comparing its historical volatility, American Creek Resources is 1.01 times less risky than Aurania Resources. The otc stock trades about -0.16 of its potential returns per unit of risk. The Aurania Resources is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Aurania Resources on December 30, 2024 and sell it today you would lose (4.00) from holding Aurania Resources or give up 13.79% of portfolio value over 90 days.

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

American Creek Resources  vs.  Aurania Resources

American Creek Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Creek Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aurania Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aurania Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aurania Resources is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American Creek and Aurania Resources

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

The idea behind American Creek Resources and Aurania Resources 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.