Correlation Between Aris Water and Proficient Auto

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

By analyzing existing cross correlation between Aris Water Solutions and Proficient Auto Logistics,, you can compare the effects of market volatilities on Aris Water and Proficient Auto 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 Aris Water with a short position of Proficient Auto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and Proficient Auto.

Diversification Opportunities for Aris Water and Proficient Auto

-0.47

Correlation Coefficient

Aris Water  Proficient Auto

Very good diversification

The 3 months correlation between Aris and Proficient is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Proficient Auto Logistics, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proficient Auto Logi and Aris Water 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 Aris Water Solutions are associated (or correlated) with Proficient Auto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proficient Auto Logi has no effect on the direction of Aris Water i.e., Aris Water and Proficient Auto go up and down completely randomly.

Pair Corralation between Aris Water and Proficient Auto

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 1.83 times more return on investment than Proficient Auto. However, Aris Water is 1.83 times more volatile than Proficient Auto Logistics,. It trades about 0.41 of its potential returns per unit of risk. Proficient Auto Logistics, is currently generating about 0.24 per unit of risk. If you would invest  1,656  in Aris Water Solutions on September 5, 2024 and sell it today you would earn a total of  1,096  from holding Aris Water Solutions or generate 66.18% return on investment over 90 days.

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

Aris Water Solutions  vs.  Proficient Auto Logistics,

Aris Water Solutions

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Proficient Auto Logi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Proficient Auto Logistics, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Aris Water and Proficient Auto

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

The idea behind Aris Water Solutions and Proficient Auto Logistics, 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.