Correlation Between World Copper and Arena Minerals

Can any of the company-specific risk be diversified away by investing in both World Copper and Arena Minerals 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 World Copper and Arena Minerals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Copper and Arena Minerals, you can compare the effects of market volatilities on World Copper and Arena Minerals 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 World Copper with a short position of Arena Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Copper and Arena Minerals.

Diversification Opportunities for World Copper and Arena Minerals

-0.59

Correlation Coefficient

World Copper  Arena Minerals

Excellent diversification

The 3 months correlation between World and Arena is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding World Copper and Arena Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Minerals and World Copper 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 World Copper are associated (or correlated) with Arena Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Minerals has no effect on the direction of World Copper i.e., World Copper and Arena Minerals go up and down completely randomly.

Pair Corralation between World Copper and Arena Minerals

If you would invest  4.82  in World Copper on March 13, 2024 and sell it today you would earn a total of  13.18  from holding World Copper or generate 273.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.61%
Values	Daily Returns

World Copper  vs.  Arena Minerals

World Copper

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in World Copper are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, World Copper reported solid returns over the last few months and may actually be approaching a breakup point.

Arena Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Arena Minerals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with World Copper and Arena Minerals

The main advantage of trading using opposite World Copper and Arena Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Copper position performs unexpectedly, Arena Minerals 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 Arena Minerals will offset losses from the drop in Arena Minerals' long position.

The idea behind World Copper and Arena Minerals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.