Correlation Between Arcosa and Cardno

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

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

Diversification Opportunities for Arcosa and Cardno

-0.6

Correlation Coefficient

Arcosa  Cardno

Excellent diversification

The 3 months correlation between Arcosa and Cardno is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and Cardno Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardno Limited 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 Cardno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardno Limited has no effect on the direction of Arcosa i.e., Arcosa and Cardno go up and down completely randomly.

Pair Corralation between Arcosa and Cardno

Considering the 90-day investment horizon Arcosa Inc is expected to under-perform the Cardno. But the stock apears to be less risky and, when comparing its historical volatility, Arcosa Inc is 4.88 times less risky than Cardno. The stock trades about -0.35 of its potential returns per unit of risk. The Cardno Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Cardno Limited on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Cardno Limited or generate 8.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Arcosa Inc  vs.  Cardno Limited

Arcosa Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcosa Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Arcosa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cardno Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cardno Limited 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 nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Arcosa and Cardno

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

The idea behind Arcosa Inc and Cardno Limited 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.