Correlation Between Arctic Star and Clean Air

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

Diversification Opportunities for Arctic Star and Clean Air

-0.19

Correlation Coefficient

Arctic Star  Clean Air

Good diversification

The 3 months correlation between Arctic and Clean is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and Clean Air Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clean Air Metals 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 Clean Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clean Air Metals has no effect on the direction of Arctic Star i.e., Arctic Star and Clean Air go up and down completely randomly.

Pair Corralation between Arctic Star and Clean Air

Assuming the 90 days horizon Arctic Star Exploration is expected to generate 3.37 times more return on investment than Clean Air. However, Arctic Star is 3.37 times more volatile than Clean Air Metals. It trades about 0.11 of its potential returns per unit of risk. Clean Air Metals is currently generating about 0.04 per unit of risk. If you would invest  0.92  in Arctic Star Exploration on December 29, 2024 and sell it today you would earn a total of  0.54  from holding Arctic Star Exploration or generate 58.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Arctic Star Exploration  vs.  Clean Air Metals

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 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arctic Star reported solid returns over the last few months and may actually be approaching a breakup point.

Clean Air Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clean Air Metals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, Clean Air reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arctic Star and Clean Air

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

The idea behind Arctic Star Exploration and Clean Air Metals 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.