Correlation Between Arizona Sonoran and IMetal Resources

Can any of the company-specific risk be diversified away by investing in both Arizona Sonoran and IMetal Resources 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 IMetal Resources 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 iMetal Resources, you can compare the effects of market volatilities on Arizona Sonoran and IMetal Resources 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 IMetal Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arizona Sonoran and IMetal Resources.

Diversification Opportunities for Arizona Sonoran and IMetal Resources

0.55

Correlation Coefficient

Arizona Sonoran  IMetal Resources

Very weak diversification

The 3 months correlation between Arizona and IMetal is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and iMetal Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iMetal Resources 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 IMetal Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iMetal Resources has no effect on the direction of Arizona Sonoran i.e., Arizona Sonoran and IMetal Resources go up and down completely randomly.

Pair Corralation between Arizona Sonoran and IMetal Resources

Assuming the 90 days trading horizon Arizona Sonoran Copper is expected to generate 0.37 times more return on investment than IMetal Resources. However, Arizona Sonoran Copper is 2.74 times less risky than IMetal Resources. It trades about -0.02 of its potential returns per unit of risk. iMetal Resources is currently generating about -0.01 per unit of risk. If you would invest  155.00  in Arizona Sonoran Copper on September 14, 2024 and sell it today you would lose (9.00) from holding Arizona Sonoran Copper or give up 5.81% of portfolio value over 90 days.

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

Arizona Sonoran Copper  vs.  iMetal Resources

Arizona Sonoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arizona Sonoran Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Arizona Sonoran is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iMetal Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iMetal Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, IMetal Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Arizona Sonoran and IMetal Resources

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

The idea behind Arizona Sonoran Copper and iMetal Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.