Correlation Between American Pacific and Big Ridge
Can any of the company-specific risk be diversified away by investing in both American Pacific and Big Ridge 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 American Pacific and Big Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Pacific Mining and Big Ridge Gold, you can compare the effects of market volatilities on American Pacific and Big Ridge 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 American Pacific with a short position of Big Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Pacific and Big Ridge.
Diversification Opportunities for American Pacific and Big Ridge
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between American and Big is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding American Pacific Mining and Big Ridge Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Ridge Gold and American Pacific 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 American Pacific Mining are associated (or correlated) with Big Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Ridge Gold has no effect on the direction of American Pacific i.e., American Pacific and Big Ridge go up and down completely randomly.
Pair Corralation between American Pacific and Big Ridge
Assuming the 90 days horizon American Pacific is expected to generate 7.48 times less return on investment than Big Ridge. But when comparing it to its historical volatility, American Pacific Mining is 1.47 times less risky than Big Ridge. It trades about 0.01 of its potential returns per unit of risk. Big Ridge Gold is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 6.00 in Big Ridge Gold on August 29, 2024 and sell it today you would earn a total of 0.79 from holding Big Ridge Gold or generate 13.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Pacific Mining vs. Big Ridge Gold
Performance |
| Timeline |
| American Pacific Mining |
| Big Ridge Gold |
American Pacific and Big Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Pacific and Big Ridge
The main advantage of trading using opposite American Pacific and Big Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Pacific position performs unexpectedly, Big Ridge 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 Big Ridge will offset losses from the drop in Big Ridge's long position.| American Pacific vs. Westward Gold | American Pacific vs. Heliostar Metals | American Pacific vs. Revival Gold | American Pacific vs. Cabral Gold |
| Big Ridge vs. Vertiv Holdings Co | Big Ridge vs. Nasdaq Inc | Big Ridge vs. McDonalds | Big Ridge vs. Walmart |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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