Correlation Between Arafura Resources and Red Moon
Can any of the company-specific risk be diversified away by investing in both Arafura Resources and Red Moon 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 Red Moon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arafura Resources and Red Moon Resources, you can compare the effects of market volatilities on Arafura Resources and Red Moon 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 Red Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arafura Resources and Red Moon.
Diversification Opportunities for Arafura Resources and Red Moon
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arafura and Red is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arafura Resources and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Arafura Resources i.e., Arafura Resources and Red Moon go up and down completely randomly.
Pair Corralation between Arafura Resources and Red Moon
Assuming the 90 days horizon Arafura Resources is expected to under-perform the Red Moon. In addition to that, Arafura Resources is 2.41 times more volatile than Red Moon Resources. It trades about -0.01 of its total potential returns per unit of risk. Red Moon Resources is currently generating about 0.0 per unit of volatility. If you would invest 47.00 in Red Moon Resources on August 29, 2024 and sell it today you would lose (3.00) from holding Red Moon Resources or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arafura Resources vs. Red Moon Resources
Performance |
| Timeline |
| Arafura Resources |
| Red Moon Resources |
Arafura Resources and Red Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arafura Resources and Red Moon
The main advantage of trading using opposite Arafura Resources and Red Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arafura Resources position performs unexpectedly, Red Moon 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 Red Moon will offset losses from the drop in Red Moon'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 |
| Red Moon vs. Aurwest Resources | Red Moon vs. Benton Resources | Red Moon vs. Pan Global Resources | Red Moon vs. Tower 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |