Correlation Between Arax Holdings and Argentum

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

By analyzing existing cross correlation between Arax Holdings Corp and Argentum 47, you can compare the effects of market volatilities on Arax Holdings and Argentum 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 Arax Holdings with a short position of Argentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arax Holdings and Argentum.

Diversification Opportunities for Arax Holdings and Argentum

-0.46

Correlation Coefficient

Arax Holdings  Argentum

Very good diversification

The 3 months correlation between Arax and Argentum is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Arax Holdings Corp and Argentum 47 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argentum 47 and Arax Holdings 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 Arax Holdings Corp are associated (or correlated) with Argentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argentum 47 has no effect on the direction of Arax Holdings i.e., Arax Holdings and Argentum go up and down completely randomly.

Pair Corralation between Arax Holdings and Argentum

Given the investment horizon of 90 days Arax Holdings is expected to generate 4.31 times less return on investment than Argentum. In addition to that, Arax Holdings is 1.2 times more volatile than Argentum 47. It trades about 0.03 of its total potential returns per unit of risk. Argentum 47 is currently generating about 0.14 per unit of volatility. If you would invest  0.52  in Argentum 47 on December 2, 2024 and sell it today you would earn a total of  0.43  from holding Argentum 47 or generate 82.69% return on investment over 90 days.

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

Arax Holdings Corp  vs.  Argentum 47

Arax Holdings Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arax Holdings Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Arax Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Argentum 47

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argentum 47 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical and fundamental indicators, Argentum reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arax Holdings and Argentum

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

The idea behind Arax Holdings Corp and Argentum 47 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.