Correlation Between Arizona Metals and Kiplin Metals

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

By analyzing existing cross correlation between Arizona Metals Corp and Kiplin Metals, you can compare the effects of market volatilities on Arizona Metals and Kiplin Metals 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 Arizona Metals with a short position of Kiplin Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arizona Metals and Kiplin Metals.

Diversification Opportunities for Arizona Metals and Kiplin Metals

-0.58

Correlation Coefficient

Arizona Metals  Kiplin Metals

Excellent diversification

The 3 months correlation between Arizona and Kiplin is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Metals Corp and Kiplin Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kiplin Metals and Arizona Metals 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 Arizona Metals Corp are associated (or correlated) with Kiplin Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kiplin Metals has no effect on the direction of Arizona Metals i.e., Arizona Metals and Kiplin Metals go up and down completely randomly.

Pair Corralation between Arizona Metals and Kiplin Metals

Assuming the 90 days trading horizon Arizona Metals Corp is expected to under-perform the Kiplin Metals. But the stock apears to be less risky and, when comparing its historical volatility, Arizona Metals Corp is 1.83 times less risky than Kiplin Metals. The stock trades about -0.01 of its potential returns per unit of risk. The Kiplin Metals is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Kiplin Metals on December 30, 2024 and sell it today you would earn a total of  8.00  from holding Kiplin Metals or generate 34.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Arizona Metals Corp  vs.  Kiplin Metals

Arizona Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arizona Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Arizona Metals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Kiplin Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kiplin Metals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kiplin Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Metals and Kiplin Metals

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

The idea behind Arizona Metals Corp and Kiplin Metals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.