Correlation Between High Coast and Arctic Blue

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

By analyzing existing cross correlation between High Coast Distillery and Arctic Blue Beverages, you can compare the effects of market volatilities on High Coast and Arctic Blue 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 High Coast with a short position of Arctic Blue. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Coast and Arctic Blue.

Diversification Opportunities for High Coast and Arctic Blue

-0.83

Correlation Coefficient

High Coast  Arctic Blue

Pay attention - limited upside

The 3 months correlation between High and Arctic is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding High Coast Distillery and Arctic Blue Beverages in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Blue Beverages and High Coast 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 High Coast Distillery are associated (or correlated) with Arctic Blue. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Blue Beverages has no effect on the direction of High Coast i.e., High Coast and Arctic Blue go up and down completely randomly.

Pair Corralation between High Coast and Arctic Blue

Assuming the 90 days trading horizon High Coast Distillery is expected to generate 0.48 times more return on investment than Arctic Blue. However, High Coast Distillery is 2.1 times less risky than Arctic Blue. It trades about 0.01 of its potential returns per unit of risk. Arctic Blue Beverages is currently generating about -0.04 per unit of risk. If you would invest  4,560  in High Coast Distillery on September 14, 2024 and sell it today you would lose (260.00) from holding High Coast Distillery or give up 5.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.63%
Values	Daily Returns

High Coast Distillery  vs.  Arctic Blue Beverages

High Coast Distillery

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in High Coast Distillery are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, High Coast sustained solid returns over the last few months and may actually be approaching a breakup point.

Arctic Blue Beverages

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Blue Beverages has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with High Coast and Arctic Blue

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

The idea behind High Coast Distillery and Arctic Blue Beverages 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.