Correlation Between Arq and Luxfer Holdings

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

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

Diversification Opportunities for Arq and Luxfer Holdings

0.54

Correlation Coefficient

Arq  Luxfer Holdings

Very weak diversification

The 3 months correlation between Arq and Luxfer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Luxfer Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luxfer Holdings PLC 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 Luxfer Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luxfer Holdings PLC has no effect on the direction of Arq i.e., Arq and Luxfer Holdings go up and down completely randomly.

Pair Corralation between Arq and Luxfer Holdings

Considering the 90-day investment horizon Arq Inc is expected to under-perform the Luxfer Holdings. In addition to that, Arq is 2.33 times more volatile than Luxfer Holdings PLC. It trades about -0.2 of its total potential returns per unit of risk. Luxfer Holdings PLC is currently generating about -0.32 per unit of volatility. If you would invest  1,402  in Luxfer Holdings PLC on October 12, 2024 and sell it today you would lose (144.00) from holding Luxfer Holdings PLC or give up 10.27% of portfolio value over 90 days.

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

Arq Inc  vs.  Luxfer Holdings PLC

Arq Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 7 (%) 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.

Luxfer Holdings PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Luxfer Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Luxfer Holdings is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Arq and Luxfer Holdings

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

The idea behind Arq Inc and Luxfer Holdings PLC 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.