Correlation Between Arq and China Natural

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

By analyzing existing cross correlation between Arq Inc and China Natural Resources, you can compare the effects of market volatilities on Arq and China Natural 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 China Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arq and China Natural.

Diversification Opportunities for Arq and China Natural

0.61

Correlation Coefficient

Arq  China Natural

Poor diversification

The 3 months correlation between Arq and China is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources 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 China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of Arq i.e., Arq and China Natural go up and down completely randomly.

Pair Corralation between Arq and China Natural

Considering the 90-day investment horizon Arq Inc is expected to under-perform the China Natural. But the stock apears to be less risky and, when comparing its historical volatility, Arq Inc is 1.68 times less risky than China Natural. The stock trades about -0.25 of its potential returns per unit of risk. The China Natural Resources is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  63.00  in China Natural Resources on December 27, 2024 and sell it today you would lose (5.00) from holding China Natural Resources or give up 7.94% of portfolio value over 90 days.

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

Arq Inc  vs.  China Natural Resources

Arq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

China Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, China Natural is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Arq and China Natural

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

The idea behind Arq Inc and China Natural Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.