Correlation Between Arctic Star and Metalex Ventures

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

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

Diversification Opportunities for Arctic Star and Metalex Ventures

0.28

Correlation Coefficient

Arctic Star  Metalex Ventures

Modest diversification

The 3 months correlation between Arctic and Metalex is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and Metalex Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalex Ventures and Arctic Star 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 Arctic Star Exploration are associated (or correlated) with Metalex Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalex Ventures has no effect on the direction of Arctic Star i.e., Arctic Star and Metalex Ventures go up and down completely randomly.

Pair Corralation between Arctic Star and Metalex Ventures

Assuming the 90 days horizon Arctic Star is expected to generate 1.76 times less return on investment than Metalex Ventures. But when comparing it to its historical volatility, Arctic Star Exploration is 1.35 times less risky than Metalex Ventures. It trades about 0.08 of its potential returns per unit of risk. Metalex Ventures is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Metalex Ventures on September 14, 2024 and sell it today you would lose (4.00) from holding Metalex Ventures or give up 66.67% of portfolio value over 90 days.

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

Arctic Star Exploration  vs.  Metalex Ventures

Arctic Star Exploration

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Star Exploration are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arctic Star showed solid returns over the last few months and may actually be approaching a breakup point.

Metalex Ventures

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with Arctic Star and Metalex Ventures

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

The idea behind Arctic Star Exploration and Metalex Ventures 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.