Correlation Between Aris Water and Scholastic

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

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

Diversification Opportunities for Aris Water and Scholastic

-0.14

Correlation Coefficient

Aris Water  Scholastic

Good diversification

The 3 months correlation between Aris and Scholastic is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Scholastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholastic and Aris Water 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 Aris Water Solutions are associated (or correlated) with Scholastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholastic has no effect on the direction of Aris Water i.e., Aris Water and Scholastic go up and down completely randomly.

Pair Corralation between Aris Water and Scholastic

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 0.7 times more return on investment than Scholastic. However, Aris Water Solutions is 1.43 times less risky than Scholastic. It trades about 0.14 of its potential returns per unit of risk. Scholastic is currently generating about -0.25 per unit of risk. If you would invest  2,507  in Aris Water Solutions on October 16, 2024 and sell it today you would earn a total of  212.00  from holding Aris Water Solutions or generate 8.46% return on investment over 90 days.

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

Aris Water Solutions  vs.  Scholastic

Aris Water Solutions

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aris Water and Scholastic

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

The idea behind Aris Water Solutions and Scholastic 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.