Correlation Between Arch Resources and Ramaco Resources

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

Diversification Opportunities for Arch Resources and Ramaco Resources

0.0

Correlation Coefficient

Arch Resources  Ramaco Resources

Pay attention - limited upside

The 3 months correlation between Arch and Ramaco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Arch Resources and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Arch Resources i.e., Arch Resources and Ramaco Resources go up and down completely randomly.

Pair Corralation between Arch Resources and Ramaco Resources

If you would invest (100.00) in Arch Resources on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Arch Resources or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Arch Resources  vs.  Ramaco Resources

Arch Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arch Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Arch Resources is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Ramaco Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ramaco Resources is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arch Resources and Ramaco Resources

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

The idea behind Arch Resources and Ramaco Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.