Correlation Between Petra Diamonds and American Creek

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

By analyzing existing cross correlation between Petra Diamonds Limited and American Creek Resources, you can compare the effects of market volatilities on Petra Diamonds and American Creek 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 Petra Diamonds with a short position of American Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petra Diamonds and American Creek.

Diversification Opportunities for Petra Diamonds and American Creek

-0.54

Correlation Coefficient

Petra Diamonds  American Creek

Excellent diversification

The 3 months correlation between Petra and American is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Petra Diamonds Limited and American Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Creek Resources and Petra Diamonds 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 Petra Diamonds Limited are associated (or correlated) with American Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Creek Resources has no effect on the direction of Petra Diamonds i.e., Petra Diamonds and American Creek go up and down completely randomly.

Pair Corralation between Petra Diamonds and American Creek

If you would invest  35.00  in Petra Diamonds Limited on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Petra Diamonds Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Petra Diamonds Limited  vs.  American Creek Resources

Petra Diamonds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petra Diamonds Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

American Creek Resources

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Creek Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, American Creek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petra Diamonds and American Creek

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

The idea behind Petra Diamonds Limited and American Creek Resources 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.