Correlation Between Repco Home and Archean Chemical

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

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

Diversification Opportunities for Repco Home and Archean Chemical

-0.01

Correlation Coefficient

Repco Home  Archean Chemical

Good diversification

The 3 months correlation between Repco and Archean is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Repco Home Finance and Archean Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archean Chemical Ind and Repco Home 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 Repco Home Finance are associated (or correlated) with Archean Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archean Chemical Ind has no effect on the direction of Repco Home i.e., Repco Home and Archean Chemical go up and down completely randomly.

Pair Corralation between Repco Home and Archean Chemical

Assuming the 90 days trading horizon Repco Home Finance is expected to under-perform the Archean Chemical. In addition to that, Repco Home is 1.61 times more volatile than Archean Chemical Industries. It trades about -0.07 of its total potential returns per unit of risk. Archean Chemical Industries is currently generating about -0.04 per unit of volatility. If you would invest  68,400  in Archean Chemical Industries on October 6, 2024 and sell it today you would lose (2,340) from holding Archean Chemical Industries or give up 3.42% of portfolio value over 90 days.

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

Repco Home Finance  vs.  Archean Chemical Industries

Repco Home Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repco Home Finance 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Archean Chemical Ind

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Repco Home and Archean Chemical

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

The idea behind Repco Home Finance and Archean Chemical Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.