Correlation Between Arko Corp and Sportsmans

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

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

Diversification Opportunities for Arko Corp and Sportsmans

-0.02

Correlation Coefficient

Arko Corp  Sportsmans

Good diversification

The 3 months correlation between Arko and Sportsmans is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Arko Corp and Sportsmans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsmans 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 Sportsmans. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsmans has no effect on the direction of Arko Corp i.e., Arko Corp and Sportsmans go up and down completely randomly.

Pair Corralation between Arko Corp and Sportsmans

Given the investment horizon of 90 days Arko Corp is expected to under-perform the Sportsmans. But the stock apears to be less risky and, when comparing its historical volatility, Arko Corp is 2.43 times less risky than Sportsmans. The stock trades about -0.03 of its potential returns per unit of risk. The Sportsmans is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  288.00  in Sportsmans on October 5, 2024 and sell it today you would lose (31.00) from holding Sportsmans or give up 10.76% of portfolio value over 90 days.

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

Arko Corp  vs.  Sportsmans

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.

Sportsmans

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arko Corp and Sportsmans

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

The idea behind Arko Corp and Sportsmans 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.