Correlation Between Arch Resources and American Resources
Can any of the company-specific risk be diversified away by investing in both Arch Resources and American Resources 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 Arch Resources and American Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Resources and American Resources Corp, you can compare the effects of market volatilities on Arch Resources and American Resources 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 Arch Resources with a short position of American Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Resources and American Resources.
Diversification Opportunities for Arch Resources and American Resources
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Arch and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arch Resources and American Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Resources Corp and Arch Resources 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 Arch Resources are associated (or correlated) with American Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Resources Corp has no effect on the direction of Arch Resources i.e., Arch Resources and American Resources go up and down completely randomly.
Pair Corralation between Arch Resources and American Resources
Given the investment horizon of 90 days Arch Resources is expected to under-perform the American Resources. But the stock apears to be less risky and, when comparing its historical volatility, Arch Resources is 3.22 times less risky than American Resources. The stock trades about -0.21 of its potential returns per unit of risk. The American Resources Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 97.00 in American Resources Corp on September 17, 2024 and sell it today you would earn a total of 24.50 from holding American Resources Corp or generate 25.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Arch Resources vs. American Resources Corp
Performance |
Timeline |
Arch Resources |
American Resources Corp |
Arch Resources and American Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arch Resources and American Resources
The main advantage of trading using opposite Arch Resources and American Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Resources position performs unexpectedly, American Resources 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 American Resources will offset losses from the drop in American Resources' long position.Arch Resources vs. Warrior Met Coal | Arch Resources vs. Ramaco Resources | Arch Resources vs. SunCoke Energy | Arch Resources vs. American Resources Corp |
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Check out your portfolio center.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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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