Correlation Between Arctic Blue and High Coast

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

By analyzing existing cross correlation between Arctic Blue Beverages and High Coast Distillery, you can compare the effects of market volatilities on Arctic Blue and High Coast 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 Blue with a short position of High Coast. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arctic Blue and High Coast.

Diversification Opportunities for Arctic Blue and High Coast

-0.21

Correlation Coefficient

Arctic Blue  High Coast

Very good diversification

The 3 months correlation between Arctic and High is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Blue Beverages and High Coast Distillery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Coast Distillery and Arctic Blue 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 Blue Beverages are associated (or correlated) with High Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Coast Distillery has no effect on the direction of Arctic Blue i.e., Arctic Blue and High Coast go up and down completely randomly.

Pair Corralation between Arctic Blue and High Coast

Assuming the 90 days trading horizon Arctic Blue Beverages is expected to generate 11.29 times more return on investment than High Coast. However, Arctic Blue is 11.29 times more volatile than High Coast Distillery. It trades about 0.26 of its potential returns per unit of risk. High Coast Distillery is currently generating about 0.03 per unit of risk. If you would invest  9.65  in Arctic Blue Beverages on December 29, 2024 and sell it today you would earn a total of  160.35  from holding Arctic Blue Beverages or generate 1661.66% return on investment over 90 days.

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

Arctic Blue Beverages  vs.  High Coast Distillery

Arctic Blue Beverages

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Blue Beverages are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Arctic Blue sustained solid returns over the last few months and may actually be approaching a breakup point.

High Coast Distillery

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, High Coast is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arctic Blue and High Coast

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

The idea behind Arctic Blue Beverages and High Coast Distillery 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.