Correlation Between High Arctic and Bri Chem

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

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

Diversification Opportunities for High Arctic and Bri Chem

0.05

Correlation Coefficient

High Arctic  Bri Chem

Significant diversification

The 3 months correlation between High and Bri is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding High Arctic Energy and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp and High Arctic 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 Arctic Energy are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of High Arctic i.e., High Arctic and Bri Chem go up and down completely randomly.

Pair Corralation between High Arctic and Bri Chem

Assuming the 90 days trading horizon High Arctic Energy is expected to generate 2.14 times more return on investment than Bri Chem. However, High Arctic is 2.14 times more volatile than Bri Chem Corp. It trades about 0.02 of its potential returns per unit of risk. Bri Chem Corp is currently generating about 0.0 per unit of risk. If you would invest  177.00  in High Arctic Energy on September 8, 2024 and sell it today you would lose (65.00) from holding High Arctic Energy or give up 36.72% of portfolio value over 90 days.

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

High Arctic Energy  vs.  Bri Chem Corp

High Arctic Energy

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, High Arctic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Bri Chem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bri Chem Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Bri Chem is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with High Arctic and Bri Chem

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

The idea behind High Arctic Energy and Bri Chem Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.