Correlation Between Archer Stock and Archer Focus

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

By analyzing existing cross correlation between Archer Stock Fund and Archer Focus, you can compare the effects of market volatilities on Archer Stock and Archer Focus 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 Archer Stock with a short position of Archer Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Archer Stock and Archer Focus.

Diversification Opportunities for Archer Stock and Archer Focus

0.74

Correlation Coefficient

Archer Stock  Archer Focus

Poor diversification

The 3 months correlation between Archer and Archer is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Archer Stock Fund and Archer Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Focus and Archer Stock 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 Archer Stock Fund are associated (or correlated) with Archer Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Focus has no effect on the direction of Archer Stock i.e., Archer Stock and Archer Focus go up and down completely randomly.

Pair Corralation between Archer Stock and Archer Focus

Assuming the 90 days horizon Archer Stock Fund is expected to generate 0.93 times more return on investment than Archer Focus. However, Archer Stock Fund is 1.07 times less risky than Archer Focus. It trades about -0.13 of its potential returns per unit of risk. Archer Focus is currently generating about -0.15 per unit of risk. If you would invest  7,386  in Archer Stock Fund on December 21, 2024 and sell it today you would lose (766.00) from holding Archer Stock Fund or give up 10.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Archer Stock Fund  vs.  Archer Focus

Archer Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Archer Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Archer Focus has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Archer Stock and Archer Focus

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

The idea behind Archer Stock Fund and Archer Focus 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..