Correlation Between Arko Corp and Ambari Brands

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

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

Diversification Opportunities for Arko Corp and Ambari Brands

0.06

Correlation Coefficient

Arko Corp  Ambari Brands

Significant diversification

The 3 months correlation between Arko and Ambari is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arko Corp and Ambari Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambari Brands and Arko Corp 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 Arko Corp are associated (or correlated) with Ambari Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambari Brands has no effect on the direction of Arko Corp i.e., Arko Corp and Ambari Brands go up and down completely randomly.

Pair Corralation between Arko Corp and Ambari Brands

Given the investment horizon of 90 days Arko Corp is expected to under-perform the Ambari Brands. But the stock apears to be less risky and, when comparing its historical volatility, Arko Corp is 11.18 times less risky than Ambari Brands. The stock trades about 0.0 of its potential returns per unit of risk. The Ambari Brands is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Ambari Brands on October 5, 2024 and sell it today you would lose (7.50) from holding Ambari Brands or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.89%
Values	Daily Returns

Arko Corp  vs.  Ambari Brands

Arko Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arko Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Arko Corp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Ambari Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ambari Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Ambari Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Arko Corp and Ambari Brands

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

The idea behind Arko Corp and Ambari Brands 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.