Correlation Between Prairie Provident and Aminex PLC

Can any of the company-specific risk be diversified away by investing in both Prairie Provident and Aminex PLC 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 Prairie Provident and Aminex PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Prairie Provident and Aminex PLC

0.52

Correlation Coefficient

Prairie Provident  Aminex PLC

Very weak diversification

The 3 months correlation between Prairie and Aminex is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Prairie Provident Resources and Aminex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aminex PLC and Prairie Provident 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 Prairie Provident Resources are associated (or correlated) with Aminex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aminex PLC has no effect on the direction of Prairie Provident i.e., Prairie Provident and Aminex PLC go up and down completely randomly.

Pair Corralation between Prairie Provident and Aminex PLC

Assuming the 90 days horizon Prairie Provident Resources is expected to generate 1.04 times more return on investment than Aminex PLC. However, Prairie Provident is 1.04 times more volatile than Aminex PLC. It trades about 0.09 of its potential returns per unit of risk. Aminex PLC is currently generating about -0.26 per unit of risk. If you would invest  3.20  in Prairie Provident Resources on December 2, 2024 and sell it today you would earn a total of  0.34  from holding Prairie Provident Resources or generate 10.62% return on investment over 90 days.

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

Prairie Provident Resources  vs.  Aminex PLC

Prairie Provident

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prairie Provident Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prairie Provident reported solid returns over the last few months and may actually be approaching a breakup point.

Aminex PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aminex PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Aminex PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prairie Provident and Aminex PLC

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

The idea behind Prairie Provident Resources and Aminex PLC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.