Correlation Between Petra Diamonds and Arras Minerals

Can any of the company-specific risk be diversified away by investing in both Petra Diamonds and Arras 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 Petra Diamonds and Arras Minerals 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 Arras Minerals Corp, you can compare the effects of market volatilities on Petra Diamonds and Arras 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 Petra Diamonds with a short position of Arras Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petra Diamonds and Arras Minerals.

Diversification Opportunities for Petra Diamonds and Arras Minerals

0.42

Correlation Coefficient

Petra Diamonds  Arras Minerals

Very weak diversification

The 3 months correlation between Petra and Arras is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Petra Diamonds Limited and Arras Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arras Minerals Corp 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 Arras Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arras Minerals Corp has no effect on the direction of Petra Diamonds i.e., Petra Diamonds and Arras Minerals go up and down completely randomly.

Pair Corralation between Petra Diamonds and Arras Minerals

If you would invest  23.00  in Arras Minerals Corp on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Arras Minerals Corp or generate 0.0% return on investment over 90 days.

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

Petra Diamonds Limited  vs.  Arras Minerals Corp

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.

Arras Minerals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arras Minerals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's forward-looking signals remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Petra Diamonds and Arras Minerals

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

The idea behind Petra Diamonds Limited and Arras 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.