Correlation Between Arafura Resources and Metals Creek
Can any of the company-specific risk be diversified away by investing in both Arafura Resources and Metals Creek 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 Metals Creek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arafura Resources and Metals Creek Resources, you can compare the effects of market volatilities on Arafura Resources and Metals Creek 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 Metals Creek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Metals Creek.
Diversification Opportunities for Arafura Resources and Metals Creek
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Arafura and Metals is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Metals Creek Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Creek Resources 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 Metals Creek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Creek Resources has no effect on the direction of Arafura Resources i.e., Arafura Resources and Metals Creek go up and down completely randomly.
Pair Corralation between Arafura Resources and Metals Creek
Assuming the 90 days horizon Arafura Resources is expected to generate 0.73 times more return on investment than Metals Creek. However, Arafura Resources is 1.37 times less risky than Metals Creek. It trades about 0.09 of its potential returns per unit of risk. Metals Creek Resources is currently generating about 0.03 per unit of risk. If you would invest 9.00 in Arafura Resources on November 27, 2024 and sell it today you would earn a total of 0.90 from holding Arafura Resources or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arafura Resources vs. Metals Creek Resources
Performance |
| Timeline |
| Arafura Resources |
| Metals Creek Resources |
Arafura Resources and Metals Creek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arafura Resources and Metals Creek
The main advantage of trading using opposite Arafura Resources and Metals Creek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arafura Resources position performs unexpectedly, Metals Creek 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 Metals Creek will offset losses from the drop in Metals Creek'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 |
| Metals Creek vs. Grizzly Discoveries | Metals Creek vs. Greenland Minerals And | Metals Creek vs. First Energy Metals | Metals Creek vs. C3 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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