Correlation Between Amarc Resources and Alumina Limited

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

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

Diversification Opportunities for Amarc Resources and Alumina Limited

0.75

Correlation Coefficient

Amarc Resources  Alumina Limited

Poor diversification

The 3 months correlation between Amarc and Alumina is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Amarc Resources and Alumina Limited PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumina Limited PK and Amarc 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 Amarc Resources are associated (or correlated) with Alumina Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumina Limited PK has no effect on the direction of Amarc Resources i.e., Amarc Resources and Alumina Limited go up and down completely randomly.

Pair Corralation between Amarc Resources and Alumina Limited

Assuming the 90 days horizon Amarc Resources is expected to under-perform the Alumina Limited. In addition to that, Amarc Resources is 1.21 times more volatile than Alumina Limited PK. It trades about -0.12 of its total potential returns per unit of risk. Alumina Limited PK is currently generating about 0.32 per unit of volatility. If you would invest  423.00  in Alumina Limited PK on March 5, 2024 and sell it today you would earn a total of  74.00  from holding Alumina Limited PK or generate 17.49% return on investment over 90 days.

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

Amarc Resources  vs.  Alumina Limited PK

Amarc Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amarc Resources are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Amarc Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Alumina Limited PK

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Alumina Limited PK are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile primary indicators, Alumina Limited showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amarc Resources and Alumina Limited

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

The idea behind Amarc Resources and Alumina Limited PK 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.