Correlation Between Aurania Resources and Arras Minerals

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

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

Diversification Opportunities for Aurania Resources and Arras Minerals

0.38

Correlation Coefficient

Aurania Resources  Arras Minerals

Weak diversification

The 3 months correlation between Aurania and Arras is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aurania Resources and Arras Minerals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arras Minerals Corp and Aurania 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 Aurania Resources are associated (or correlated) with Arras Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arras Minerals Corp has no effect on the direction of Aurania Resources i.e., Aurania Resources and Arras Minerals go up and down completely randomly.

Pair Corralation between Aurania Resources and Arras Minerals

Assuming the 90 days horizon Aurania Resources is expected to generate 18.31 times less return on investment than Arras Minerals. But when comparing it to its historical volatility, Aurania Resources is 2.64 times less risky than Arras Minerals. It trades about 0.01 of its potential returns per unit of risk. Arras Minerals Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Arras Minerals Corp on March 8, 2024 and sell it today you would lose (9.00) from holding Arras Minerals Corp or give up 30.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.52%
Values	Daily Returns

Aurania Resources  vs.  Arras Minerals Corp

Aurania Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aurania Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aurania Resources may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Arras Minerals Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arras Minerals Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Arras Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aurania Resources and Arras Minerals

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

The idea behind Aurania Resources and Arras Minerals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.