Correlation Between Archer Materials and BrainChip Holdings

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

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

Diversification Opportunities for Archer Materials and BrainChip Holdings

0.36

Correlation Coefficient

Archer Materials  BrainChip Holdings

Weak diversification

The 3 months correlation between Archer and BrainChip is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Archer Materials Limited and BrainChip Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrainChip Holdings and Archer Materials 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 Archer Materials Limited are associated (or correlated) with BrainChip Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrainChip Holdings has no effect on the direction of Archer Materials i.e., Archer Materials and BrainChip Holdings go up and down completely randomly.

Pair Corralation between Archer Materials and BrainChip Holdings

Assuming the 90 days horizon Archer Materials Limited is expected to generate 1.64 times more return on investment than BrainChip Holdings. However, Archer Materials is 1.64 times more volatile than BrainChip Holdings. It trades about 0.07 of its potential returns per unit of risk. BrainChip Holdings is currently generating about 0.07 per unit of risk. If you would invest  25.00  in Archer Materials Limited on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Archer Materials Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.45%
Values	Daily Returns

Archer Materials Limited  vs.  BrainChip Holdings

Archer Materials

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Materials Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Archer Materials reported solid returns over the last few months and may actually be approaching a breakup point.

BrainChip Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrainChip Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, BrainChip Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Archer Materials and BrainChip Holdings

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

The idea behind Archer Materials Limited and BrainChip 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.