Correlation Between Capella Minerals and Arctic Star

Can any of the company-specific risk be diversified away by investing in both Capella Minerals and Arctic Star 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 Capella Minerals and Arctic Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capella Minerals Limited and Arctic Star Exploration, you can compare the effects of market volatilities on Capella Minerals and Arctic Star 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 Capella Minerals with a short position of Arctic Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capella Minerals and Arctic Star.

Diversification Opportunities for Capella Minerals and Arctic Star

0.28

Correlation Coefficient

Capella Minerals  Arctic Star

Modest diversification

The 3 months correlation between Capella and Arctic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Capella Minerals Limited and Arctic Star Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Star Exploration and Capella Minerals 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 Capella Minerals Limited are associated (or correlated) with Arctic Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Star Exploration has no effect on the direction of Capella Minerals i.e., Capella Minerals and Arctic Star go up and down completely randomly.

Pair Corralation between Capella Minerals and Arctic Star

Assuming the 90 days horizon Capella Minerals Limited is expected to generate 3.87 times more return on investment than Arctic Star. However, Capella Minerals is 3.87 times more volatile than Arctic Star Exploration. It trades about 0.14 of its potential returns per unit of risk. Arctic Star Exploration is currently generating about 0.11 per unit of risk. If you would invest  2.23  in Capella Minerals Limited on December 30, 2024 and sell it today you would earn a total of  0.63  from holding Capella Minerals Limited or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Capella Minerals Limited  vs.  Arctic Star Exploration

Capella Minerals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capella Minerals Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Capella Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

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 8 (%) 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.

Pair Trading with Capella Minerals and Arctic Star

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

The idea behind Capella Minerals Limited and Arctic Star 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.