Correlation Between Arctic Star and American Creek

Can any of the company-specific risk be diversified away by investing in both Arctic Star and American Creek 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 Arctic Star and American Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Arctic Star and American Creek

-0.46

Correlation Coefficient

Arctic Star  American Creek

Very good diversification

The 3 months correlation between Arctic and American is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources and Arctic Star 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 Arctic Star Exploration are associated (or correlated) with American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of Arctic Star i.e., Arctic Star and American Creek go up and down completely randomly.

Pair Corralation between Arctic Star and American Creek

Assuming the 90 days horizon Arctic Star Exploration is expected to generate 1.73 times more return on investment than American Creek. However, Arctic Star is 1.73 times more volatile than American Creek Resources. It trades about 0.08 of its potential returns per unit of risk. American Creek Resources is currently generating about -0.15 per unit of risk. If you would invest  0.85  in Arctic Star Exploration on November 28, 2024 and sell it today you would earn a total of  0.19  from holding Arctic Star Exploration or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Arctic Star Exploration  vs.  American Creek Resources

Arctic Star Exploration

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Star Exploration are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arctic Star reported solid returns over the last few months and may actually be approaching a breakup point.

American Creek Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Creek Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arctic Star and American Creek

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

The idea behind Arctic Star Exploration and American Creek 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.