Correlation Between Pampa Metals and Arizona Metals
Can any of the company-specific risk be diversified away by investing in both Pampa 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 Pampa 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 Pampa Metals and Arizona Metals Corp, you can compare the effects of market volatilities on Pampa 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 Pampa Metals with a short position of Arizona Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pampa Metals and Arizona Metals.
Diversification Opportunities for Pampa Metals and Arizona Metals
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pampa and Arizona is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pampa Metals 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 Pampa 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 Pampa Metals 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 Pampa Metals i.e., Pampa Metals and Arizona Metals go up and down completely randomly.
Pair Corralation between Pampa Metals and Arizona Metals
Assuming the 90 days horizon Pampa Metals is expected to generate 6.03 times less return on investment than Arizona Metals. But when comparing it to its historical volatility, Pampa Metals is 1.52 times less risky than Arizona Metals. It trades about 0.02 of its potential returns per unit of risk. Arizona Metals Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 108.00 in Arizona Metals Corp on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Arizona Metals Corp or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pampa Metals vs. Arizona Metals Corp
Performance |
| Timeline |
| Pampa Metals |
| Arizona Metals Corp |
Pampa Metals and Arizona Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pampa Metals and Arizona Metals
The main advantage of trading using opposite Pampa Metals and Arizona Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pampa 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 Pampa Metals 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.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.
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