Correlation Between Dycom Industries and Argan

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

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

Diversification Opportunities for Dycom Industries and Argan

0.41

Correlation Coefficient

Dycom Industries  Argan

Very weak diversification

The 3 months correlation between Dycom and Argan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Dycom Industries and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc and Dycom Industries 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 Dycom Industries are associated (or correlated) with Argan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argan Inc has no effect on the direction of Dycom Industries i.e., Dycom Industries and Argan go up and down completely randomly.

Pair Corralation between Dycom Industries and Argan

Allowing for the 90-day total investment horizon Dycom Industries is expected to generate 1.79 times less return on investment than Argan. But when comparing it to its historical volatility, Dycom Industries is 1.24 times less risky than Argan. It trades about 0.08 of its potential returns per unit of risk. Argan Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,734  in Argan Inc on November 19, 2024 and sell it today you would earn a total of  11,125  from holding Argan Inc or generate 297.94% return on investment over 90 days.

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

Dycom Industries  vs.  Argan Inc

Dycom Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dycom Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Argan Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Argan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dycom Industries and Argan

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

The idea behind Dycom Industries and Argan Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.