Correlation Between Arcosa and Argan

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

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

Diversification Opportunities for Arcosa and Argan

0.74

Correlation Coefficient

Arcosa  Argan

Poor diversification

The 3 months correlation between Arcosa and Argan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc and Arcosa 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 Arcosa Inc are associated (or correlated) with Argan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argan Inc has no effect on the direction of Arcosa i.e., Arcosa and Argan go up and down completely randomly.

Pair Corralation between Arcosa and Argan

Considering the 90-day investment horizon Arcosa Inc is expected to under-perform the Argan. But the stock apears to be less risky and, when comparing its historical volatility, Arcosa Inc is 2.39 times less risky than Argan. The stock trades about -0.13 of its potential returns per unit of risk. The Argan Inc is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  13,864  in Argan Inc on December 28, 2024 and sell it today you would lose (2,341) from holding Argan Inc or give up 16.89% of portfolio value over 90 days.

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

Arcosa Inc  vs.  Argan Inc

Arcosa Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcosa Inc 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 fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Argan Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Argan Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arcosa and Argan

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

The idea behind Arcosa Inc and Argan Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.