Correlation Between Rocky Mountain and Arbor Metals

Can any of the company-specific risk be diversified away by investing in both Rocky Mountain and Arbor Metals 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 Rocky Mountain and Arbor Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rocky Mountain Liquor and Arbor Metals Corp, you can compare the effects of market volatilities on Rocky Mountain and Arbor Metals 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 Rocky Mountain with a short position of Arbor Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocky Mountain and Arbor Metals.

Diversification Opportunities for Rocky Mountain and Arbor Metals

0.4

Correlation Coefficient

Rocky Mountain  Arbor Metals

Very weak diversification

The 3 months correlation between Rocky and Arbor is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Mountain Liquor and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp and Rocky Mountain 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 Rocky Mountain Liquor are associated (or correlated) with Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of Rocky Mountain i.e., Rocky Mountain and Arbor Metals go up and down completely randomly.

Pair Corralation between Rocky Mountain and Arbor Metals

Assuming the 90 days horizon Rocky Mountain Liquor is expected to under-perform the Arbor Metals. But the stock apears to be less risky and, when comparing its historical volatility, Rocky Mountain Liquor is 2.71 times less risky than Arbor Metals. The stock trades about -0.05 of its potential returns per unit of risk. The Arbor Metals Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Arbor Metals Corp on December 20, 2024 and sell it today you would earn a total of  15.00  from holding Arbor Metals Corp or generate 65.22% return on investment over 90 days.

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

Rocky Mountain Liquor  vs.  Arbor Metals Corp

Rocky Mountain Liquor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Arbor Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Mountain and Arbor Metals

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

The idea behind Rocky Mountain Liquor and Arbor Metals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.