Correlation Between Arq and China Natural

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

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

Diversification Opportunities for Arq and China Natural

-0.42

Correlation Coefficient

Arq  China Natural

Very good diversification

The 3 months correlation between Arq and China is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and China Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Natural Resources and Arq 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 Arq Inc are associated (or correlated) with China Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Natural Resources has no effect on the direction of Arq i.e., Arq and China Natural go up and down completely randomly.

Pair Corralation between Arq and China Natural

Considering the 90-day investment horizon Arq Inc is expected to generate 1.31 times more return on investment than China Natural. However, Arq is 1.31 times more volatile than China Natural Resources. It trades about 0.29 of its potential returns per unit of risk. China Natural Resources is currently generating about -0.1 per unit of risk. If you would invest  597.00  in Arq Inc on August 30, 2024 and sell it today you would earn a total of  164.00  from holding Arq Inc or generate 27.47% return on investment over 90 days.

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

Arq Inc  vs.  China Natural Resources

Arq Inc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

China Natural Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Natural Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, China Natural reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arq and China Natural

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

The idea behind Arq Inc and China Natural 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.

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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.