Correlation Between Arq and Crown LNG

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

By analyzing existing cross correlation between Arq Inc and Crown LNG Holdings, you can compare the effects of market volatilities on Arq and Crown LNG 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 Arq with a short position of Crown LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arq and Crown LNG.

Diversification Opportunities for Arq and Crown LNG

0.4

Correlation Coefficient

Arq  Crown LNG

Very weak diversification

The 3 months correlation between Arq and Crown is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Crown LNG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crown LNG Holdings and Arq 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 Arq Inc are associated (or correlated) with Crown LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crown LNG Holdings has no effect on the direction of Arq i.e., Arq and Crown LNG go up and down completely randomly.

Pair Corralation between Arq and Crown LNG

Considering the 90-day investment horizon Arq Inc is expected to generate 0.41 times more return on investment than Crown LNG. However, Arq Inc is 2.42 times less risky than Crown LNG. It trades about 0.05 of its potential returns per unit of risk. Crown LNG Holdings is currently generating about -0.07 per unit of risk. If you would invest  303.00  in Arq Inc on October 11, 2024 and sell it today you would earn a total of  328.00  from holding Arq Inc or generate 108.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	26.06%
Values	Daily Returns

Arq Inc  vs.  Crown LNG Holdings

Arq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Crown LNG Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crown LNG Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Crown LNG unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arq and Crown LNG

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

The idea behind Arq Inc and Crown LNG Holdings 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.