Correlation Between E Split and ARC Resources

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

By analyzing existing cross correlation between E Split Corp and ARC Resources, you can compare the effects of market volatilities on E Split and ARC Resources 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 E Split with a short position of ARC Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of E Split and ARC Resources.

Diversification Opportunities for E Split and ARC Resources

0.66

Correlation Coefficient

E Split  ARC Resources

Poor diversification

The 3 months correlation between ENS-PA and ARC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding E Split Corp and ARC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARC Resources and E Split 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 E Split Corp are associated (or correlated) with ARC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARC Resources has no effect on the direction of E Split i.e., E Split and ARC Resources go up and down completely randomly.

Pair Corralation between E Split and ARC Resources

Assuming the 90 days trading horizon E Split Corp is expected to generate 0.28 times more return on investment than ARC Resources. However, E Split Corp is 3.61 times less risky than ARC Resources. It trades about 0.24 of its potential returns per unit of risk. ARC Resources is currently generating about 0.03 per unit of risk. If you would invest  1,019  in E Split Corp on August 30, 2024 and sell it today you would earn a total of  97.00  from holding E Split Corp or generate 9.52% return on investment over 90 days.

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

E Split Corp  vs.  ARC Resources

E Split Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in E Split Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, E Split may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ARC Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARC Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, ARC Resources is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with E Split and ARC Resources

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

The idea behind E Split Corp and ARC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.