Correlation Between Arctic Star and Zimplats Holdings

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

Diversification Opportunities for Arctic Star and Zimplats Holdings

-0.18

Correlation Coefficient

Arctic Star  Zimplats Holdings

Good diversification

The 3 months correlation between Arctic and Zimplats is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Arctic Star Exploration and Zimplats Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimplats Holdings 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 Zimplats Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimplats Holdings has no effect on the direction of Arctic Star i.e., Arctic Star and Zimplats Holdings go up and down completely randomly.

Pair Corralation between Arctic Star and Zimplats Holdings

Assuming the 90 days horizon Arctic Star Exploration is expected to under-perform the Zimplats Holdings. In addition to that, Arctic Star is 1.32 times more volatile than Zimplats Holdings Limited. It trades about -0.1 of its total potential returns per unit of risk. Zimplats Holdings Limited is currently generating about -0.04 per unit of volatility. If you would invest  1,077  in Zimplats Holdings Limited on September 15, 2024 and sell it today you would lose (165.00) from holding Zimplats Holdings Limited or give up 15.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Arctic Star Exploration  vs.  Zimplats Holdings Limited

Arctic Star Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Zimplats Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zimplats Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Zimplats Holdings 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 Zimplats Holdings

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

The idea behind Arctic Star Exploration and Zimplats Holdings Limited 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.