Correlation Between Grande Portage and American Creek

Can any of the company-specific risk be diversified away by investing in both Grande Portage and American Creek 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 Grande Portage and American Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grande Portage Resources and American Creek Resources, you can compare the effects of market volatilities on Grande Portage and American Creek 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 Grande Portage with a short position of American Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grande Portage and American Creek.

Diversification Opportunities for Grande Portage and American Creek

0.4

Correlation Coefficient

Grande Portage  American Creek

Very weak diversification

The 3 months correlation between Grande and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Grande Portage Resources and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources and Grande Portage 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 Grande Portage Resources are associated (or correlated) with American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of Grande Portage i.e., Grande Portage and American Creek go up and down completely randomly.

Pair Corralation between Grande Portage and American Creek

Assuming the 90 days horizon Grande Portage Resources is expected to under-perform the American Creek. In addition to that, Grande Portage is 1.94 times more volatile than American Creek Resources. It trades about -0.08 of its total potential returns per unit of risk. American Creek Resources is currently generating about -0.16 per unit of volatility. If you would invest  34.00  in American Creek Resources on September 3, 2024 and sell it today you would lose (4.00) from holding American Creek Resources or give up 11.76% of portfolio value over 90 days.

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

Grande Portage Resources  vs.  American Creek Resources

Grande Portage Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grande Portage Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Grande Portage showed solid returns over the last few months and may actually be approaching a breakup point.

American Creek Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Creek Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, American Creek showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grande Portage and American Creek

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

The idea behind Grande Portage Resources and American Creek Resources 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.