Correlation Between Arctic Star and Auxico Resources

Can any of the company-specific risk be diversified away by investing in both Arctic Star and Auxico 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 Arctic Star and Auxico Resources 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 Auxico Resources Canada, you can compare the effects of market volatilities on Arctic Star and Auxico 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 Arctic Star with a short position of Auxico Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arctic Star and Auxico Resources.

Diversification Opportunities for Arctic Star and Auxico Resources

0.0

Correlation Coefficient

Arctic Star  Auxico Resources

Pay attention - limited upside

The 3 months correlation between Arctic and Auxico is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and Auxico Resources Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auxico Resources Canada 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 Auxico Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auxico Resources Canada has no effect on the direction of Arctic Star i.e., Arctic Star and Auxico Resources go up and down completely randomly.

Pair Corralation between Arctic Star and Auxico Resources

Assuming the 90 days horizon Arctic Star is expected to generate 3.55 times less return on investment than Auxico Resources. But when comparing it to its historical volatility, Arctic Star Exploration is 2.99 times less risky than Auxico Resources. It trades about 0.06 of its potential returns per unit of risk. Auxico Resources Canada is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Auxico Resources Canada on December 2, 2024 and sell it today you would lose (21.40) from holding Auxico Resources Canada or give up 97.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	47.27%
Values	Daily Returns

Arctic Star Exploration  vs.  Auxico Resources Canada

Arctic Star Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arctic Star Exploration are ranked lower than 7 (%) 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.

Auxico Resources Canada

Risk-Adjusted Performance

Very Weak

Over the last 90 days Auxico Resources Canada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Auxico Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arctic Star and Auxico Resources

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

The idea behind Arctic Star Exploration and Auxico Resources Canada 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.