Correlation Between ARC Document and Aramark Holdings

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

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

Diversification Opportunities for ARC Document and Aramark Holdings

0.31

Correlation Coefficient

ARC Document  Aramark Holdings

Weak diversification

The 3 months correlation between ARC and Aramark is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ARC Document Solutions and Aramark Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aramark Holdings and ARC Document 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 ARC Document Solutions are associated (or correlated) with Aramark Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aramark Holdings has no effect on the direction of ARC Document i.e., ARC Document and Aramark Holdings go up and down completely randomly.

Pair Corralation between ARC Document and Aramark Holdings

Considering the 90-day investment horizon ARC Document is expected to generate 2.57 times less return on investment than Aramark Holdings. But when comparing it to its historical volatility, ARC Document Solutions is 7.68 times less risky than Aramark Holdings. It trades about 0.17 of its potential returns per unit of risk. Aramark Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,819  in Aramark Holdings on September 15, 2024 and sell it today you would earn a total of  198.00  from holding Aramark Holdings or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	78.13%
Values	Daily Returns

ARC Document Solutions  vs.  Aramark Holdings

ARC Document Solutions

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ARC Document Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ARC Document is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aramark Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aramark Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent primary indicators, Aramark Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with ARC Document and Aramark Holdings

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

The idea behind ARC Document Solutions and Aramark Holdings 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.