Correlation Between Amarc Resources and Edison Cobalt

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

By analyzing existing cross correlation between Amarc Resources and Edison Cobalt Corp, you can compare the effects of market volatilities on Amarc Resources and Edison Cobalt 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 Edison Cobalt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amarc Resources and Edison Cobalt.

Diversification Opportunities for Amarc Resources and Edison Cobalt

-0.17

Correlation Coefficient

Amarc Resources  Edison Cobalt

Good diversification

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

Pair Corralation between Amarc Resources and Edison Cobalt

Assuming the 90 days horizon Amarc Resources is expected to generate 1.86 times more return on investment than Edison Cobalt. However, Amarc Resources is 1.86 times more volatile than Edison Cobalt Corp. It trades about 0.36 of its potential returns per unit of risk. Edison Cobalt Corp is currently generating about 0.13 per unit of risk. If you would invest  8.00  in Amarc Resources on February 4, 2024 and sell it today you would earn a total of  4.00  from holding Amarc Resources or generate 50.0% return on investment over 90 days.

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

Amarc Resources  vs.  Edison Cobalt Corp

Amarc Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amarc Resources are ranked lower than 8 (%) 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.

Edison Cobalt Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edison Cobalt Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Amarc Resources and Edison Cobalt

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

The idea behind Amarc Resources and Edison Cobalt 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.