Correlation Between Arko Corp and Target

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

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

Diversification Opportunities for Arko Corp and Target

0.82

Correlation Coefficient

Arko Corp  Target

Very poor diversification

The 3 months correlation between Arko and Target is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arko Corp and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Arko Corp i.e., Arko Corp and Target go up and down completely randomly.

Pair Corralation between Arko Corp and Target

Given the investment horizon of 90 days Arko Corp is expected to under-perform the Target. In addition to that, Arko Corp is 3.13 times more volatile than Target. It trades about -0.1 of its total potential returns per unit of risk. Target is currently generating about -0.17 per unit of volatility. If you would invest  13,128  in Target on December 24, 2024 and sell it today you would lose (2,293) from holding Target or give up 17.47% of portfolio value over 90 days.

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

Arko Corp  vs.  Target

Arko Corp

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Target

Risk-Adjusted Performance

Very Weak

Over the last 90 days Target has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Arko Corp and Target

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

The idea behind Arko Corp and Target 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.