Correlation Between Arcadia Minerals and Lindian Resources

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

Diversification Opportunities for Arcadia Minerals and Lindian Resources

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Arcadia and Lindian is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arcadia Minerals Ltd and Lindian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindian Resources 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 Lindian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindian Resources has no effect on the direction of Arcadia Minerals i.e., Arcadia Minerals and Lindian Resources go up and down completely randomly.

Pair Corralation between Arcadia Minerals and Lindian Resources

Assuming the 90 days trading horizon Arcadia Minerals Ltd is expected to under-perform the Lindian Resources. But the stock apears to be less risky and, when comparing its historical volatility, Arcadia Minerals Ltd is 1.4 times less risky than Lindian Resources. The stock trades about -0.11 of its potential returns per unit of risk. The Lindian Resources is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Lindian Resources on September 5, 2024 and sell it today you would lose (3.80) from holding Lindian Resources or give up 29.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Arcadia Minerals Ltd  vs.  Lindian Resources

 Performance 
       Timeline  
Arcadia Minerals 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Arcadia Minerals Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
Lindian Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Lindian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Arcadia Minerals and Lindian Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arcadia Minerals and Lindian Resources

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

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