Correlation Between American Creek and Petra Diamonds

Can any of the company-specific risk be diversified away by investing in both American Creek and Petra Diamonds 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 Petra Diamonds 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 Petra Diamonds Limited, you can compare the effects of market volatilities on American Creek and Petra Diamonds 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 Petra Diamonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Creek and Petra Diamonds.

Diversification Opportunities for American Creek and Petra Diamonds

0.16

Correlation Coefficient

American Creek  Petra Diamonds

Average diversification

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

Pair Corralation between American Creek and Petra Diamonds

Assuming the 90 days horizon American Creek Resources is expected to under-perform the Petra Diamonds. In addition to that, American Creek is 3.05 times more volatile than Petra Diamonds Limited. It trades about -0.18 of its total potential returns per unit of risk. Petra Diamonds Limited is currently generating about -0.02 per unit of volatility. If you would invest  39.00  in Petra Diamonds Limited on December 28, 2024 and sell it today you would lose (2.00) from holding Petra Diamonds Limited or give up 5.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

American Creek Resources  vs.  Petra Diamonds Limited

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 weak 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.

Petra Diamonds

Risk-Adjusted Performance

Very Weak

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

Pair Trading with American Creek and Petra Diamonds

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

The idea behind American Creek Resources and Petra Diamonds Limited 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.