Correlation Between Fastenal and Archer Aviation

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

By analyzing existing cross correlation between Fastenal Company and Archer Aviation WT, you can compare the effects of market volatilities on Fastenal and Archer Aviation 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 Fastenal with a short position of Archer Aviation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and Archer Aviation.

Diversification Opportunities for Fastenal and Archer Aviation

-0.09

Correlation Coefficient

Fastenal  Archer Aviation

Good diversification

The 3 months correlation between Fastenal and Archer is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Archer Aviation WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Aviation WT and Fastenal 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 Fastenal Company are associated (or correlated) with Archer Aviation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Aviation WT has no effect on the direction of Fastenal i.e., Fastenal and Archer Aviation go up and down completely randomly.

Pair Corralation between Fastenal and Archer Aviation

Given the investment horizon of 90 days Fastenal Company is expected to under-perform the Archer Aviation. But the stock apears to be less risky and, when comparing its historical volatility, Fastenal Company is 12.47 times less risky than Archer Aviation. The stock trades about -0.52 of its potential returns per unit of risk. The Archer Aviation WT is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  239.00  in Archer Aviation WT on September 23, 2024 and sell it today you would earn a total of  59.00  from holding Archer Aviation WT or generate 24.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.38%
Values	Daily Returns

Fastenal Company  vs.  Archer Aviation WT

Fastenal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fastenal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Archer Aviation WT

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Fastenal and Archer Aviation

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

The idea behind Fastenal Company and Archer Aviation WT 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.