Correlation Between Arctic Fish and Ice Fish

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

Diversification Opportunities for Arctic Fish and Ice Fish

0.57

Correlation Coefficient

Arctic Fish  Ice Fish

Very weak diversification

The 3 months correlation between Arctic and Ice is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Fish Holding and Ice Fish Farm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ice Fish Farm 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 Ice Fish. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ice Fish Farm has no effect on the direction of Arctic Fish i.e., Arctic Fish and Ice Fish go up and down completely randomly.

Pair Corralation between Arctic Fish and Ice Fish

Assuming the 90 days trading horizon Arctic Fish Holding is expected to generate 0.84 times more return on investment than Ice Fish. However, Arctic Fish Holding is 1.19 times less risky than Ice Fish. It trades about -0.05 of its potential returns per unit of risk. Ice Fish Farm is currently generating about -0.07 per unit of risk. If you would invest  6,950  in Arctic Fish Holding on December 30, 2024 and sell it today you would lose (850.00) from holding Arctic Fish Holding or give up 12.23% of portfolio value over 90 days.

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

Arctic Fish Holding  vs.  Ice Fish Farm

Arctic Fish Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arctic Fish Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Ice Fish Farm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ice Fish Farm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Arctic Fish and Ice Fish

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

The idea behind Arctic Fish Holding and Ice Fish Farm 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.