Correlation Between Alien Metals and Pacific Ridge

Can any of the company-specific risk be diversified away by investing in both Alien Metals and Pacific Ridge 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 Alien Metals and Pacific Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alien Metals and Pacific Ridge Exploration, you can compare the effects of market volatilities on Alien Metals and Pacific Ridge 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 Alien Metals with a short position of Pacific Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alien Metals and Pacific Ridge.

Diversification Opportunities for Alien Metals and Pacific Ridge

0.19

Correlation Coefficient

Alien Metals  Pacific Ridge

Average diversification

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

Pair Corralation between Alien Metals and Pacific Ridge

Assuming the 90 days horizon Alien Metals is expected to generate 16.47 times more return on investment than Pacific Ridge. However, Alien Metals is 16.47 times more volatile than Pacific Ridge Exploration. It trades about 0.16 of its potential returns per unit of risk. Pacific Ridge Exploration is currently generating about -0.04 per unit of risk. If you would invest  0.23  in Alien Metals on December 30, 2024 and sell it today you would lose (0.09) from holding Alien Metals or give up 39.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.06%
Values	Daily Returns

Alien Metals  vs.  Pacific Ridge Exploration

Alien Metals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alien Metals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Alien Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pacific Ridge Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Ridge Exploration 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Alien Metals and Pacific Ridge

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

The idea behind Alien Metals and Pacific Ridge Exploration 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.