Correlation Between Stampede Drilling and Arizona Metals

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

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

Diversification Opportunities for Stampede Drilling and Arizona Metals

-0.01

Correlation Coefficient

Stampede Drilling  Arizona Metals

Good diversification

The 3 months correlation between Stampede and Arizona is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling and Arizona Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Metals Corp and Stampede Drilling 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 Stampede Drilling are associated (or correlated) with Arizona Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Metals Corp has no effect on the direction of Stampede Drilling i.e., Stampede Drilling and Arizona Metals go up and down completely randomly.

Pair Corralation between Stampede Drilling and Arizona Metals

Assuming the 90 days horizon Stampede Drilling is expected to generate 1.24 times more return on investment than Arizona Metals. However, Stampede Drilling is 1.24 times more volatile than Arizona Metals Corp. It trades about 0.0 of its potential returns per unit of risk. Arizona Metals Corp is currently generating about -0.01 per unit of risk. If you would invest  18.00  in Stampede Drilling on December 30, 2024 and sell it today you would lose (2.00) from holding Stampede Drilling or give up 11.11% of portfolio value over 90 days.

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

Stampede Drilling  vs.  Arizona Metals Corp

Stampede Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Stampede Drilling is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arizona Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arizona Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Arizona Metals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stampede Drilling and Arizona Metals

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

The idea behind Stampede Drilling and Arizona 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.