Correlation Between Montero Mining and Arbor Metals

Can any of the company-specific risk be diversified away by investing in both Montero Mining and Arbor Metals 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 Montero Mining and Arbor Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Montero Mining and and Arbor Metals Corp, you can compare the effects of market volatilities on Montero Mining and Arbor Metals 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 Montero Mining with a short position of Arbor Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montero Mining and Arbor Metals.

Diversification Opportunities for Montero Mining and Arbor Metals

-0.41

Correlation Coefficient

Montero Mining  Arbor Metals

Very good diversification

The 3 months correlation between Montero and Arbor is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Montero Mining and and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp and Montero Mining 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 Montero Mining and are associated (or correlated) with Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of Montero Mining i.e., Montero Mining and Arbor Metals go up and down completely randomly.

Pair Corralation between Montero Mining and Arbor Metals

Assuming the 90 days horizon Montero Mining is expected to generate 8.93 times less return on investment than Arbor Metals. But when comparing it to its historical volatility, Montero Mining and is 5.78 times less risky than Arbor Metals. It trades about 0.11 of its potential returns per unit of risk. Arbor Metals Corp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Arbor Metals Corp on October 9, 2024 and sell it today you would earn a total of  7.00  from holding Arbor Metals Corp or generate 25.93% return on investment over 90 days.

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

Montero Mining and  vs.  Arbor Metals Corp

Montero Mining

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Montero Mining and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Montero Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Montero Mining and Arbor Metals

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

The idea behind Montero Mining and and Arbor Metals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.