Correlation Between Highland Copper and Amarc Resources

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

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

Diversification Opportunities for Highland Copper and Amarc Resources

-0.49

Correlation Coefficient

Highland Copper  Amarc Resources

Very good diversification

The 3 months correlation between Highland and Amarc is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Highland Copper and Amarc Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amarc Resources and Highland Copper 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 Highland Copper are associated (or correlated) with Amarc Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amarc Resources has no effect on the direction of Highland Copper i.e., Highland Copper and Amarc Resources go up and down completely randomly.

Pair Corralation between Highland Copper and Amarc Resources

Given the investment horizon of 90 days Highland Copper is expected to generate 3.74 times less return on investment than Amarc Resources. But when comparing it to its historical volatility, Highland Copper is 1.59 times less risky than Amarc Resources. It trades about 0.03 of its potential returns per unit of risk. Amarc Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Amarc Resources on December 8, 2024 and sell it today you would earn a total of  33.00  from holding Amarc Resources or generate 253.85% return on investment over 90 days.

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

Highland Copper  vs.  Amarc Resources

Highland Copper

Risk-Adjusted Performance

Weak

Over the last 90 days Highland Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highland Copper is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Amarc Resources

Risk-Adjusted Performance

OK

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

Pair Trading with Highland Copper and Amarc Resources

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

The idea behind Highland Copper and Amarc 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.