Correlation Between Arizona Sonoran and World Copper

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

Diversification Opportunities for Arizona Sonoran and World Copper

-0.43

Correlation Coefficient

Arizona Sonoran  World Copper

Very good diversification

The 3 months correlation between Arizona and World is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and World Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Copper 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 World Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Copper has no effect on the direction of Arizona Sonoran i.e., Arizona Sonoran and World Copper go up and down completely randomly.

Pair Corralation between Arizona Sonoran and World Copper

Assuming the 90 days trading horizon Arizona Sonoran is expected to generate 9.18 times less return on investment than World Copper. But when comparing it to its historical volatility, Arizona Sonoran Copper is 2.27 times less risky than World Copper. It trades about 0.0 of its potential returns per unit of risk. World Copper is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  16.00  in World Copper on September 14, 2024 and sell it today you would lose (8.75) from holding World Copper or give up 54.69% of portfolio value over 90 days.

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

Arizona Sonoran Copper  vs.  World Copper

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.

World Copper

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in World Copper are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, World Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Sonoran and World Copper

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

The idea behind Arizona Sonoran Copper and World Copper 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 Stocks Directory module to find actively traded stocks across global markets.