Correlation Between Talon Metals and Arizona Metals

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

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

Diversification Opportunities for Talon Metals and Arizona Metals

-0.45

Correlation Coefficient

Talon Metals  Arizona Metals

Very good diversification

The 3 months correlation between Talon and Arizona is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Talon Metals Corp 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 Talon Metals 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 Talon Metals Corp 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 Talon Metals i.e., Talon Metals and Arizona Metals go up and down completely randomly.

Pair Corralation between Talon Metals and Arizona Metals

Assuming the 90 days trading horizon Talon Metals is expected to generate 10.34 times less return on investment than Arizona Metals. But when comparing it to its historical volatility, Talon Metals Corp is 1.03 times less risky than Arizona Metals. It trades about 0.0 of its potential returns per unit of risk. Arizona Metals Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Arizona Metals Corp on September 3, 2024 and sell it today you would earn a total of  15.00  from holding Arizona Metals Corp or generate 8.24% return on investment over 90 days.

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

Talon Metals Corp  vs.  Arizona Metals Corp

Talon Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Arizona Metals Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arizona Metals Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Arizona Metals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Talon Metals and Arizona Metals

The main advantage of trading using opposite Talon Metals and Arizona Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Talon Metals 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 Talon Metals Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.