Correlation Between ARC Resources and Auxly Cannabis

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

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

Diversification Opportunities for ARC Resources and Auxly Cannabis

-0.32

Correlation Coefficient

ARC Resources  Auxly Cannabis

Very good diversification

The 3 months correlation between ARC and Auxly is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and Auxly Cannabis Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auxly Cannabis Group and ARC Resources 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 Resources are associated (or correlated) with Auxly Cannabis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auxly Cannabis Group has no effect on the direction of ARC Resources i.e., ARC Resources and Auxly Cannabis go up and down completely randomly.

Pair Corralation between ARC Resources and Auxly Cannabis

Assuming the 90 days trading horizon ARC Resources is expected to generate 0.26 times more return on investment than Auxly Cannabis. However, ARC Resources is 3.91 times less risky than Auxly Cannabis. It trades about 0.06 of its potential returns per unit of risk. Auxly Cannabis Group is currently generating about -0.01 per unit of risk. If you would invest  2,274  in ARC Resources on September 24, 2024 and sell it today you would earn a total of  157.00  from holding ARC Resources or generate 6.9% return on investment over 90 days.

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

ARC Resources  vs.  Auxly Cannabis Group

ARC Resources

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ARC Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, ARC Resources may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Auxly Cannabis Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auxly Cannabis Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Auxly Cannabis is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ARC Resources and Auxly Cannabis

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

The idea behind ARC Resources and Auxly Cannabis 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.