Correlation Between Aclara Resources and McChip Resources

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

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

Diversification Opportunities for Aclara Resources and McChip Resources

0.32

Correlation Coefficient

Aclara Resources  McChip Resources

Weak diversification

The 3 months correlation between Aclara and McChip is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Aclara Resources and McChip Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McChip Resources and Aclara Resources 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 Aclara Resources are associated (or correlated) with McChip Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McChip Resources has no effect on the direction of Aclara Resources i.e., Aclara Resources and McChip Resources go up and down completely randomly.

Pair Corralation between Aclara Resources and McChip Resources

Assuming the 90 days trading horizon Aclara Resources is expected to generate 0.95 times more return on investment than McChip Resources. However, Aclara Resources is 1.05 times less risky than McChip Resources. It trades about 0.09 of its potential returns per unit of risk. McChip Resources is currently generating about 0.0 per unit of risk. If you would invest  46.00  in Aclara Resources on December 27, 2024 and sell it today you would earn a total of  9.00  from holding Aclara Resources or generate 19.57% return on investment over 90 days.

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

Aclara Resources  vs.  McChip Resources

Aclara Resources

Risk-Adjusted Performance

OK

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

McChip Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days McChip Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, McChip Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Aclara Resources and McChip Resources

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

The idea behind Aclara Resources and McChip 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.