Correlation Between ArcWest Exploration and Silver Predator

Can any of the company-specific risk be diversified away by investing in both ArcWest Exploration and Silver Predator 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 ArcWest Exploration and Silver Predator into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ArcWest Exploration and Silver Predator Corp, you can compare the effects of market volatilities on ArcWest Exploration and Silver Predator 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 ArcWest Exploration with a short position of Silver Predator. Check out your portfolio center. Please also check ongoing floating volatility patterns of ArcWest Exploration and Silver Predator.

Diversification Opportunities for ArcWest Exploration and Silver Predator

-0.17

Correlation Coefficient

ArcWest Exploration  Silver Predator

Good diversification

The 3 months correlation between ArcWest and Silver is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding ArcWest Exploration and Silver Predator Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Predator Corp and ArcWest Exploration 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 ArcWest Exploration are associated (or correlated) with Silver Predator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Predator Corp has no effect on the direction of ArcWest Exploration i.e., ArcWest Exploration and Silver Predator go up and down completely randomly.

Pair Corralation between ArcWest Exploration and Silver Predator

Assuming the 90 days horizon ArcWest Exploration is expected to under-perform the Silver Predator. But the stock apears to be less risky and, when comparing its historical volatility, ArcWest Exploration is 1.24 times less risky than Silver Predator. The stock trades about 0.0 of its potential returns per unit of risk. The Silver Predator Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Silver Predator Corp on September 4, 2024 and sell it today you would earn a total of  2.00  from holding Silver Predator Corp or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ArcWest Exploration  vs.  Silver Predator Corp

ArcWest Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcWest Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ArcWest Exploration is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Silver Predator Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Predator Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Silver Predator showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ArcWest Exploration and Silver Predator

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

The idea behind ArcWest Exploration and Silver Predator 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.

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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.