Correlation Between Argan and Aecon

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

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

Diversification Opportunities for Argan and Aecon

0.93

Correlation Coefficient

Argan  Aecon

Almost no diversification

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

Pair Corralation between Argan and Aecon

Considering the 90-day investment horizon Argan Inc is expected to generate 1.37 times more return on investment than Aecon. However, Argan is 1.37 times more volatile than Aecon Group. It trades about 0.15 of its potential returns per unit of risk. Aecon Group is currently generating about 0.17 per unit of risk. If you would invest  4,541  in Argan Inc on September 14, 2024 and sell it today you would earn a total of  9,755  from holding Argan Inc or generate 214.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	90.33%
Values	Daily Returns

Argan Inc  vs.  Aecon Group

Argan Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Aecon Group

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aecon Group are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aecon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argan and Aecon

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

The idea behind Argan Inc and Aecon Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.