Correlation Between North American and Aztec Minerals

Can any of the company-specific risk be diversified away by investing in both North American and Aztec Minerals 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 North American and Aztec Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between North American Construction and Aztec Minerals Corp, you can compare the effects of market volatilities on North American and Aztec Minerals 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 North American with a short position of Aztec Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Aztec Minerals.

Diversification Opportunities for North American and Aztec Minerals

-0.29

Correlation Coefficient

North American  Aztec Minerals

Very good diversification

The 3 months correlation between North and Aztec is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Aztec Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aztec Minerals Corp and North American 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 North American Construction are associated (or correlated) with Aztec Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aztec Minerals Corp has no effect on the direction of North American i.e., North American and Aztec Minerals go up and down completely randomly.

Pair Corralation between North American and Aztec Minerals

Assuming the 90 days trading horizon North American Construction is expected to generate 0.29 times more return on investment than Aztec Minerals. However, North American Construction is 3.42 times less risky than Aztec Minerals. It trades about 0.26 of its potential returns per unit of risk. Aztec Minerals Corp is currently generating about -0.05 per unit of risk. If you would invest  2,790  in North American Construction on September 26, 2024 and sell it today you would earn a total of  280.00  from holding North American Construction or generate 10.04% return on investment over 90 days.

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

North American Construction  vs.  Aztec Minerals Corp

North American Const

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Aztec Minerals Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aztec Minerals Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Aztec Minerals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with North American and Aztec Minerals

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

The idea behind North American Construction and Aztec Minerals 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.