Correlation Between Arizona Gold and South Pacific

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

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

Diversification Opportunities for Arizona Gold and South Pacific

0.13

Correlation Coefficient

Arizona Gold  South Pacific

Average diversification

The 3 months correlation between Arizona and South is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Gold Silver and South Pacific Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Pacific Metals and Arizona Gold 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 Arizona Gold Silver are associated (or correlated) with South Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Pacific Metals has no effect on the direction of Arizona Gold i.e., Arizona Gold and South Pacific go up and down completely randomly.

Pair Corralation between Arizona Gold and South Pacific

Assuming the 90 days horizon Arizona Gold Silver is expected to under-perform the South Pacific. In addition to that, Arizona Gold is 1.29 times more volatile than South Pacific Metals. It trades about -0.05 of its total potential returns per unit of risk. South Pacific Metals is currently generating about 0.06 per unit of volatility. If you would invest  45.00  in South Pacific Metals on December 21, 2024 and sell it today you would earn a total of  5.00  from holding South Pacific Metals or generate 11.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Arizona Gold Silver  vs.  South Pacific Metals

Arizona Gold Silver

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arizona Gold Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

South Pacific Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South Pacific Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, South Pacific showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arizona Gold and South Pacific

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

The idea behind Arizona Gold Silver and South Pacific 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.