Correlation Between Arizona Sonoran and Loncor Resources

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

Diversification Opportunities for Arizona Sonoran and Loncor Resources

0.38

Correlation Coefficient

Arizona Sonoran  Loncor Resources

Weak diversification

The 3 months correlation between Arizona and Loncor is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and Loncor Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loncor 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 Loncor Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loncor Resources has no effect on the direction of Arizona Sonoran i.e., Arizona Sonoran and Loncor Resources go up and down completely randomly.

Pair Corralation between Arizona Sonoran and Loncor Resources

Assuming the 90 days trading horizon Arizona Sonoran is expected to generate 1.1 times less return on investment than Loncor Resources. But when comparing it to its historical volatility, Arizona Sonoran Copper is 1.54 times less risky than Loncor Resources. It trades about 0.09 of its potential returns per unit of risk. Loncor Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Loncor Resources on December 4, 2024 and sell it today you would earn a total of  6.00  from holding Loncor Resources or generate 12.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Arizona Sonoran Copper  vs.  Loncor Resources

Arizona Sonoran Copper

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Sonoran Copper are ranked lower than 6 (%) 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.

Loncor Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Loncor Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Loncor Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Sonoran and Loncor Resources

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

The idea behind Arizona Sonoran Copper and Loncor 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.