Correlation Between American Sierra and Arctic Star

Can any of the company-specific risk be diversified away by investing in both American Sierra and Arctic Star 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 American Sierra and Arctic Star into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American Sierra Gold and Arctic Star Exploration, you can compare the effects of market volatilities on American Sierra and Arctic Star 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 American Sierra with a short position of Arctic Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Sierra and Arctic Star.

Diversification Opportunities for American Sierra and Arctic Star

0.23

Correlation Coefficient

American Sierra  Arctic Star

Modest diversification

The 3 months correlation between American and Arctic is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding American Sierra Gold and Arctic Star Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arctic Star Exploration and American Sierra 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 American Sierra Gold are associated (or correlated) with Arctic Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arctic Star Exploration has no effect on the direction of American Sierra i.e., American Sierra and Arctic Star go up and down completely randomly.

Pair Corralation between American Sierra and Arctic Star

Given the investment horizon of 90 days American Sierra Gold is expected to generate 3.98 times more return on investment than Arctic Star. However, American Sierra is 3.98 times more volatile than Arctic Star Exploration. It trades about 0.04 of its potential returns per unit of risk. Arctic Star Exploration is currently generating about -0.07 per unit of risk. If you would invest  0.60  in American Sierra Gold on September 16, 2024 and sell it today you would lose (0.20) from holding American Sierra Gold or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

American Sierra Gold  vs.  Arctic Star Exploration

American Sierra Gold

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

Arctic Star Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arctic Star Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with American Sierra and Arctic Star

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

The idea behind American Sierra Gold and Arctic Star Exploration 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.