Correlation Between Arras Minerals and Petra Diamonds

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

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

Diversification Opportunities for Arras Minerals and Petra Diamonds

0.42

Correlation Coefficient

Arras Minerals  Petra Diamonds

Very weak diversification

The 3 months correlation between Arras and Petra is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Arras Minerals Corp and Petra Diamonds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petra Diamonds and Arras 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 Arras Minerals Corp are associated (or correlated) with Petra Diamonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petra Diamonds has no effect on the direction of Arras Minerals i.e., Arras Minerals and Petra Diamonds go up and down completely randomly.

Pair Corralation between Arras Minerals and Petra Diamonds

If you would invest  21.00  in Arras Minerals Corp on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Arras Minerals Corp or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Arras Minerals Corp  vs.  Petra Diamonds Limited

Arras Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arras Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Petra Diamonds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arras Minerals and Petra Diamonds

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

The idea behind Arras Minerals Corp and Petra Diamonds 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .