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 |
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 2.24 times more return on investment than Bri Chem. However, High Arctic is 2.24 times more volatile than Bri Chem Corp. It trades about 0.03 of its potential returns per unit of risk. Bri Chem Corp is currently generating about 0.01 per unit of risk. If you would invest 173.00 in High Arctic Energy on September 6, 2024 and sell it today you would lose (58.00) from holding High Arctic Energy or give up 33.53% 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
Performance |
Timeline |
High Arctic Energy |
Bri Chem Corp |
High Arctic and Bri Chem Volatility Contrast
Predicted Return Density |
Returns |
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.High Arctic vs. CES Energy Solutions | High Arctic vs. Total Energy Services | High Arctic vs. PHX Energy Services |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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