Correlation Between Ardea Resources and Cobalt Blue

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

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

Diversification Opportunities for Ardea Resources and Cobalt Blue

0.37

Correlation Coefficient

Ardea Resources  Cobalt Blue

Weak diversification

The 3 months correlation between Ardea and Cobalt is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ardea Resources Limited and Cobalt Blue Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Blue Holdings and Ardea 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 Ardea Resources Limited are associated (or correlated) with Cobalt Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Blue Holdings has no effect on the direction of Ardea Resources i.e., Ardea Resources and Cobalt Blue go up and down completely randomly.

Pair Corralation between Ardea Resources and Cobalt Blue

Assuming the 90 days horizon Ardea Resources Limited is expected to under-perform the Cobalt Blue. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ardea Resources Limited is 2.04 times less risky than Cobalt Blue. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Cobalt Blue Holdings is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6.30  in Cobalt Blue Holdings on August 31, 2024 and sell it today you would lose (2.00) from holding Cobalt Blue Holdings or give up 31.75% of portfolio value over 90 days.

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

Ardea Resources Limited  vs.  Cobalt Blue Holdings

Ardea Resources

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cobalt Blue Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cobalt Blue Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Cobalt Blue is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ardea Resources and Cobalt Blue

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

The idea behind Ardea Resources Limited and Cobalt Blue Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.