Correlation Between Arafura Resources and Australian Vanadium
Can any of the company-specific risk be diversified away by investing in both Arafura Resources and Australian Vanadium 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 Arafura Resources and Australian Vanadium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arafura Resources and Australian Vanadium Limited, you can compare the effects of market volatilities on Arafura Resources and Australian Vanadium 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 Arafura Resources with a short position of Australian Vanadium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Australian Vanadium.
Diversification Opportunities for Arafura Resources and Australian Vanadium
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Arafura and Australian is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Australian Vanadium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Vanadium and Arafura 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 Arafura Resources are associated (or correlated) with Australian Vanadium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Vanadium has no effect on the direction of Arafura Resources i.e., Arafura Resources and Australian Vanadium go up and down completely randomly.
Pair Corralation between Arafura Resources and Australian Vanadium
Assuming the 90 days horizon Arafura Resources is expected to generate 3.12 times less return on investment than Australian Vanadium. In addition to that, Arafura Resources is 1.22 times more volatile than Australian Vanadium Limited. It trades about 0.09 of its total potential returns per unit of risk. Australian Vanadium Limited is currently generating about 0.35 per unit of volatility. If you would invest 1.00 in Australian Vanadium Limited on November 27, 2024 and sell it today you would earn a total of 0.80 from holding Australian Vanadium Limited or generate 80.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Arafura Resources vs. Australian Vanadium Limited
Performance |
| Timeline |
| Arafura Resources |
| Australian Vanadium |
Arafura Resources and Australian Vanadium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arafura Resources and Australian Vanadium
The main advantage of trading using opposite Arafura Resources and Australian Vanadium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arafura Resources position performs unexpectedly, Australian Vanadium 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 Australian Vanadium will offset losses from the drop in Australian Vanadium's long position.| Arafura Resources vs. Texas Rare Earth | Arafura Resources vs. Lynas Rare Earths | Arafura Resources vs. Ucore Rare Metals | Arafura Resources vs. Aurelia Metals Limited |
| Australian Vanadium vs. Champion Bear Resources | Australian Vanadium vs. Edison Cobalt Corp | Australian Vanadium vs. Baroyeca Gold Silver | Australian Vanadium vs. Avarone Metals |
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 Stocks Directory module to find actively traded stocks across global markets.
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