Correlation Between Arizona Sonoran and CANEX Metals

Can any of the company-specific risk be diversified away by investing in both Arizona Sonoran and CANEX Metals 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 Arizona Sonoran and CANEX Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arizona Sonoran Copper and CANEX Metals, you can compare the effects of market volatilities on Arizona Sonoran and CANEX Metals 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 Arizona Sonoran with a short position of CANEX Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arizona Sonoran and CANEX Metals.

Diversification Opportunities for Arizona Sonoran and CANEX Metals

0.47

Correlation Coefficient

Arizona Sonoran  CANEX Metals

Very weak diversification

The 3 months correlation between Arizona and CANEX is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and CANEX Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CANEX Metals and Arizona Sonoran 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 Arizona Sonoran Copper are associated (or correlated) with CANEX Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CANEX Metals has no effect on the direction of Arizona Sonoran i.e., Arizona Sonoran and CANEX Metals go up and down completely randomly.

Pair Corralation between Arizona Sonoran and CANEX Metals

Assuming the 90 days trading horizon Arizona Sonoran is expected to generate 1.21 times less return on investment than CANEX Metals. But when comparing it to its historical volatility, Arizona Sonoran Copper is 2.46 times less risky than CANEX Metals. It trades about 0.23 of its potential returns per unit of risk. CANEX Metals is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4.00  in CANEX Metals on December 27, 2024 and sell it today you would earn a total of  2.00  from holding CANEX Metals or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Arizona Sonoran Copper  vs.  CANEX Metals

Arizona Sonoran Copper

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Sonoran Copper are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Arizona Sonoran displayed solid returns over the last few months and may actually be approaching a breakup point.

CANEX Metals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CANEX Metals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CANEX Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Sonoran and CANEX Metals

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

The idea behind Arizona Sonoran Copper and CANEX Metals 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.