Correlation Between Argan and Southland Holdings

Can any of the company-specific risk be diversified away by investing in both Argan and Southland 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 Southland 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 Southland Holdings, you can compare the effects of market volatilities on Argan and Southland 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 Southland Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Argan and Southland Holdings.

Diversification Opportunities for Argan and Southland Holdings

-0.7

Correlation Coefficient

Argan  Southland Holdings

Excellent diversification

The 3 months correlation between Argan and Southland is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Argan i.e., Argan and Southland Holdings go up and down completely randomly.

Pair Corralation between Argan and Southland Holdings

Considering the 90-day investment horizon Argan Inc is expected to generate 0.75 times more return on investment than Southland Holdings. However, Argan Inc is 1.34 times less risky than Southland Holdings. It trades about 0.16 of its potential returns per unit of risk. Southland Holdings is currently generating about -0.01 per unit of risk. If you would invest  6,167  in Argan Inc on September 24, 2024 and sell it today you would earn a total of  7,766  from holding Argan Inc or generate 125.93% return on investment over 90 days.

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

Argan Inc  vs.  Southland Holdings

Argan Inc

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 16 (%) 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.

Southland Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southland Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Southland Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Argan and Southland Holdings

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

The idea behind Argan Inc and Southland 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.