Correlation Between Arq and Zurn Elkay

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

By analyzing existing cross correlation between Arq Inc and Zurn Elkay Water, you can compare the effects of market volatilities on Arq and Zurn Elkay 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 Zurn Elkay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arq and Zurn Elkay.

Diversification Opportunities for Arq and Zurn Elkay

0.83

Correlation Coefficient

Arq  Zurn Elkay

Very poor diversification

The 3 months correlation between Arq and Zurn is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Arq Inc and Zurn Elkay Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zurn Elkay Water 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 Zurn Elkay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zurn Elkay Water has no effect on the direction of Arq i.e., Arq and Zurn Elkay go up and down completely randomly.

Pair Corralation between Arq and Zurn Elkay

Considering the 90-day investment horizon Arq Inc is expected to generate 3.13 times more return on investment than Zurn Elkay. However, Arq is 3.13 times more volatile than Zurn Elkay Water. It trades about 0.07 of its potential returns per unit of risk. Zurn Elkay Water is currently generating about 0.07 per unit of risk. If you would invest  233.00  in Arq Inc on September 19, 2024 and sell it today you would earn a total of  443.00  from holding Arq Inc or generate 190.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Arq Inc  vs.  Zurn Elkay Water

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 abnormal basic indicators, Arq reported solid returns over the last few months and may actually be approaching a breakup point.

Zurn Elkay Water

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zurn Elkay Water are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Zurn Elkay may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arq and Zurn Elkay

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

The idea behind Arq Inc and Zurn Elkay Water 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.