Correlation Between Paramount Resources and Atlas Arteria

Can any of the company-specific risk be diversified away by investing in both Paramount Resources and Atlas Arteria 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 Paramount Resources and Atlas Arteria into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Paramount Resources and Atlas Arteria

-0.11

Correlation Coefficient

Paramount Resources  Atlas Arteria

Good diversification

The 3 months correlation between Paramount and Atlas is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Resources and Atlas Arteria Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Arteria Limited and Paramount Resources 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 Paramount Resources are associated (or correlated) with Atlas Arteria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Arteria Limited has no effect on the direction of Paramount Resources i.e., Paramount Resources and Atlas Arteria go up and down completely randomly.

Pair Corralation between Paramount Resources and Atlas Arteria

Assuming the 90 days horizon Paramount Resources is expected to under-perform the Atlas Arteria. In addition to that, Paramount Resources is 1.06 times more volatile than Atlas Arteria Limited. It trades about -0.12 of its total potential returns per unit of risk. Atlas Arteria Limited is currently generating about 0.07 per unit of volatility. If you would invest  273.00  in Atlas Arteria Limited on December 21, 2024 and sell it today you would earn a total of  37.00  from holding Atlas Arteria Limited or generate 13.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	78.33%
Values	Daily Returns

Paramount Resources  vs.  Atlas Arteria Limited

Paramount Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paramount Resources 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Atlas Arteria Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Arteria Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atlas Arteria reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paramount Resources and Atlas Arteria

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

The idea behind Paramount Resources and Atlas Arteria Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.