Correlation Between Grizzly Discoveries and Arafura Resources

Can any of the company-specific risk be diversified away by investing in both Grizzly Discoveries and Arafura Resources 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 Grizzly Discoveries and Arafura Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Grizzly Discoveries and Arafura Resources

0.06

Correlation Coefficient

Grizzly Discoveries  Arafura Resources

Significant diversification

The 3 months correlation between Grizzly and Arafura is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Grizzly Discoveries and Arafura Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arafura Resources and Grizzly Discoveries 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 Grizzly Discoveries are associated (or correlated) with Arafura Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arafura Resources has no effect on the direction of Grizzly Discoveries i.e., Grizzly Discoveries and Arafura Resources go up and down completely randomly.

Pair Corralation between Grizzly Discoveries and Arafura Resources

Assuming the 90 days horizon Grizzly Discoveries is expected to generate 1.06 times less return on investment than Arafura Resources. In addition to that, Grizzly Discoveries is 1.43 times more volatile than Arafura Resources. It trades about 0.09 of its total potential returns per unit of risk. Arafura Resources is currently generating about 0.13 per unit of volatility. If you would invest  7.20  in Arafura Resources on December 30, 2024 and sell it today you would earn a total of  4.80  from holding Arafura Resources or generate 66.67% return on investment over 90 days.

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

Grizzly Discoveries  vs.  Arafura Resources

Grizzly Discoveries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grizzly Discoveries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Grizzly Discoveries reported solid returns over the last few months and may actually be approaching a breakup point.

Arafura Resources

Risk-Adjusted Performance

OK

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

Pair Trading with Grizzly Discoveries and Arafura Resources

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

The idea behind Grizzly Discoveries and Arafura 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.