Correlation Between ARC Resources and Vista Gold

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

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

Diversification Opportunities for ARC Resources and Vista Gold

-0.58

Correlation Coefficient

ARC Resources  Vista Gold

Excellent diversification

The 3 months correlation between ARC and Vista is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and Vista Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Gold and ARC 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 ARC Resources are associated (or correlated) with Vista Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Gold has no effect on the direction of ARC Resources i.e., ARC Resources and Vista Gold go up and down completely randomly.

Pair Corralation between ARC Resources and Vista Gold

Assuming the 90 days trading horizon ARC Resources is expected to generate 0.43 times more return on investment than Vista Gold. However, ARC Resources is 2.35 times less risky than Vista Gold. It trades about 0.07 of its potential returns per unit of risk. Vista Gold is currently generating about 0.02 per unit of risk. If you would invest  1,533  in ARC Resources on October 4, 2024 and sell it today you would earn a total of  1,074  from holding ARC Resources or generate 70.06% return on investment over 90 days.

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

ARC Resources  vs.  Vista Gold

ARC Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARC Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ARC Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Vista Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vista Gold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with ARC Resources and Vista Gold

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

The idea behind ARC Resources and Vista Gold 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.