Correlation Between Argan and Reliant Holdings

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

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

Diversification Opportunities for Argan and Reliant Holdings

0.17

Correlation Coefficient

Argan  Reliant Holdings

Average diversification

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

Pair Corralation between Argan and Reliant Holdings

Considering the 90-day investment horizon Argan is expected to generate 5.31 times less return on investment than Reliant Holdings. But when comparing it to its historical volatility, Argan Inc is 7.58 times less risky than Reliant Holdings. It trades about 0.16 of its potential returns per unit of risk. Reliant Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Reliant Holdings on October 27, 2024 and sell it today you would earn a total of  1.00  from holding Reliant Holdings or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Argan Inc  vs.  Reliant Holdings

Argan Inc

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Reliant Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Reliant Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Reliant Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argan and Reliant Holdings

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

The idea behind Argan Inc and Reliant Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.