Correlation Between Construction Partners and Argan

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

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

Diversification Opportunities for Construction Partners and Argan

0.91

Correlation Coefficient

Construction Partners  Argan

Almost no diversification

The 3 months correlation between Construction and Argan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Construction Partners and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc and Construction Partners 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 Construction Partners 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 Construction Partners i.e., Construction Partners and Argan go up and down completely randomly.

Pair Corralation between Construction Partners and Argan

Given the investment horizon of 90 days Construction Partners is expected to generate 1.09 times less return on investment than Argan. But when comparing it to its historical volatility, Construction Partners is 1.02 times less risky than Argan. It trades about 0.11 of its potential returns per unit of risk. Argan Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,511  in Argan Inc on September 21, 2024 and sell it today you would earn a total of  10,437  from holding Argan Inc or generate 297.27% return on investment over 90 days.

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

Construction Partners  vs.  Argan Inc

Construction Partners

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Construction Partners are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Construction Partners exhibited solid returns over the last few months and may actually be approaching a breakup point.

Argan Inc

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Construction Partners and Argan

The main advantage of trading using opposite Construction Partners and Argan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Construction Partners 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 Construction Partners 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.