Correlation Between Energy and Arq

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

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

Diversification Opportunities for Energy and Arq

0.34

Correlation Coefficient

Energy  Arq

Weak diversification

The 3 months correlation between Energy and Arq is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Environmental and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc and Energy 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 Energy and Environmental are associated (or correlated) with Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of Energy i.e., Energy and Arq go up and down completely randomly.

Pair Corralation between Energy and Arq

Given the investment horizon of 90 days Energy and Environmental is expected to under-perform the Arq. In addition to that, Energy is 1.45 times more volatile than Arq Inc. It trades about -0.05 of its total potential returns per unit of risk. Arq Inc is currently generating about 0.04 per unit of volatility. If you would invest  661.00  in Arq Inc on October 24, 2024 and sell it today you would earn a total of  8.00  from holding Arq Inc or generate 1.21% return on investment over 90 days.

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

Energy and Environmental  vs.  Arq Inc

Energy and Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy and Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arq Inc

Risk-Adjusted Performance

6 of 100

OK

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 uncertain basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy and Arq

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

The idea behind Energy and Environmental and Arq 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.