Correlation Between Arctic Fish and Clean Seas

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

By analyzing existing cross correlation between Arctic Fish Holding and Clean Seas Seafood, you can compare the effects of market volatilities on Arctic Fish and Clean Seas 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 Fish with a short position of Clean Seas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arctic Fish and Clean Seas.

Diversification Opportunities for Arctic Fish and Clean Seas

0.09

Correlation Coefficient

Arctic Fish  Clean Seas

Significant diversification

The 3 months correlation between Arctic and Clean is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Fish Holding and Clean Seas Seafood in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Seas Seafood and Arctic Fish 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 Fish Holding are associated (or correlated) with Clean Seas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Seas Seafood has no effect on the direction of Arctic Fish i.e., Arctic Fish and Clean Seas go up and down completely randomly.

Pair Corralation between Arctic Fish and Clean Seas

Assuming the 90 days trading horizon Arctic Fish Holding is expected to generate 0.8 times more return on investment than Clean Seas. However, Arctic Fish Holding is 1.25 times less risky than Clean Seas. It trades about 0.02 of its potential returns per unit of risk. Clean Seas Seafood is currently generating about 0.02 per unit of risk. If you would invest  6,500  in Arctic Fish Holding on November 20, 2024 and sell it today you would earn a total of  100.00  from holding Arctic Fish Holding or generate 1.54% return on investment over 90 days.

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

Arctic Fish Holding  vs.  Clean Seas Seafood

Arctic Fish Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Fish Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arctic Fish is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Clean Seas Seafood

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Seas Seafood are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Clean Seas is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Arctic Fish and Clean Seas

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

The idea behind Arctic Fish Holding and Clean Seas Seafood 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.