Correlation Between Arcadia Minerals and Chilwa Minerals

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

By analyzing existing cross correlation between Arcadia Minerals Ltd and Chilwa Minerals Limited, you can compare the effects of market volatilities on Arcadia Minerals and Chilwa Minerals 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 Arcadia Minerals with a short position of Chilwa Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcadia Minerals and Chilwa Minerals.

Diversification Opportunities for Arcadia Minerals and Chilwa Minerals

0.23

Correlation Coefficient

Arcadia Minerals  Chilwa Minerals

Modest diversification

The 3 months correlation between Arcadia and Chilwa is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Arcadia Minerals Ltd and Chilwa Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chilwa Minerals and Arcadia Minerals 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 Arcadia Minerals Ltd are associated (or correlated) with Chilwa Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chilwa Minerals has no effect on the direction of Arcadia Minerals i.e., Arcadia Minerals and Chilwa Minerals go up and down completely randomly.

Pair Corralation between Arcadia Minerals and Chilwa Minerals

Assuming the 90 days trading horizon Arcadia Minerals Ltd is expected to generate 1.06 times more return on investment than Chilwa Minerals. However, Arcadia Minerals is 1.06 times more volatile than Chilwa Minerals Limited. It trades about 0.04 of its potential returns per unit of risk. Chilwa Minerals Limited is currently generating about 0.03 per unit of risk. If you would invest  1.90  in Arcadia Minerals Ltd on December 30, 2024 and sell it today you would earn a total of  0.10  from holding Arcadia Minerals Ltd or generate 5.26% return on investment over 90 days.

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

Arcadia Minerals Ltd  vs.  Chilwa Minerals Limited

Arcadia Minerals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadia Minerals Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arcadia Minerals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Chilwa Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chilwa Minerals Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Chilwa Minerals is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arcadia Minerals and Chilwa Minerals

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

The idea behind Arcadia Minerals Ltd and Chilwa Minerals 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.