Correlation Between Arafura Resources and Arizona Lithium
Can any of the company-specific risk be diversified away by investing in both Arafura Resources and Arizona Lithium 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 Arizona Lithium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arafura Resources and Arizona Lithium Limited, you can compare the effects of market volatilities on Arafura Resources and Arizona Lithium 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 Arizona Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Arizona Lithium.
Diversification Opportunities for Arafura Resources and Arizona Lithium
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Arafura and Arizona is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Arizona Lithium Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arizona Lithium 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 Arizona Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arizona Lithium has no effect on the direction of Arafura Resources i.e., Arafura Resources and Arizona Lithium go up and down completely randomly.
Pair Corralation between Arafura Resources and Arizona Lithium
Assuming the 90 days horizon Arafura Resources is expected to under-perform the Arizona Lithium. But the pink sheet apears to be less risky and, when comparing its historical volatility, Arafura Resources is 1.74 times less risky than Arizona Lithium. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Arizona Lithium Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1.30 in Arizona Lithium Limited on August 29, 2024 and sell it today you would earn a total of 0.03 from holding Arizona Lithium Limited or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arafura Resources vs. Arizona Lithium Limited
Performance |
| Timeline |
| Arafura Resources |
| Arizona Lithium |
Arafura Resources and Arizona Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arafura Resources and Arizona Lithium
The main advantage of trading using opposite Arafura Resources and Arizona Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arafura Resources position performs unexpectedly, Arizona Lithium 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 Lithium will offset losses from the drop in Arizona Lithium'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 |
| Arizona Lithium vs. Bushveld Minerals Limited | Arizona Lithium vs. Aurelia Metals Limited | Arizona Lithium vs. Artemis Resources | Arizona Lithium vs. Ascendant Resources |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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