Correlation Between SunCoke Energy and Arch Resources

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Can any of the company-specific risk be diversified away by investing in both SunCoke Energy and Arch 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 SunCoke Energy and Arch Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SunCoke Energy and Arch Resources, you can compare the effects of market volatilities on SunCoke Energy and Arch 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 SunCoke Energy with a short position of Arch Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of SunCoke Energy and Arch Resources.

Diversification Opportunities for SunCoke Energy and Arch Resources

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between SunCoke and Arch is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding SunCoke Energy and Arch Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Resources and SunCoke 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 SunCoke Energy are associated (or correlated) with Arch Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Resources has no effect on the direction of SunCoke Energy i.e., SunCoke Energy and Arch Resources go up and down completely randomly.

Pair Corralation between SunCoke Energy and Arch Resources

Considering the 90-day investment horizon SunCoke Energy is expected to generate 0.56 times more return on investment than Arch Resources. However, SunCoke Energy is 1.79 times less risky than Arch Resources. It trades about -0.25 of its potential returns per unit of risk. Arch Resources is currently generating about -0.21 per unit of risk. If you would invest  1,244  in SunCoke Energy on September 17, 2024 and sell it today you would lose (65.00) from holding SunCoke Energy or give up 5.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

SunCoke Energy  vs.  Arch Resources

 Performance 
       Timeline  
SunCoke Energy 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in SunCoke Energy are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SunCoke Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.
Arch Resources 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Arch Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, Arch Resources demonstrated solid returns over the last few months and may actually be approaching a breakup point.

SunCoke Energy and Arch Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SunCoke Energy and Arch Resources

The main advantage of trading using opposite SunCoke Energy and Arch Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SunCoke Energy position performs unexpectedly, Arch 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 Arch Resources will offset losses from the drop in Arch Resources' long position.
The idea behind SunCoke Energy and Arch 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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