Correlation Between Fluent and ARCA Gold

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

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

Diversification Opportunities for Fluent and ARCA Gold

0.43

Correlation Coefficient

Fluent  ARCA Gold

Very weak diversification

The 3 months correlation between Fluent and ARCA is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fluent Inc and ARCA Gold BUGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Gold BUGS and Fluent 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 Fluent Inc are associated (or correlated) with ARCA Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Gold BUGS has no effect on the direction of Fluent i.e., Fluent and ARCA Gold go up and down completely randomly.

Pair Corralation between Fluent and ARCA Gold

Given the investment horizon of 90 days Fluent Inc is expected to generate 2.31 times more return on investment than ARCA Gold. However, Fluent is 2.31 times more volatile than ARCA Gold BUGS. It trades about 0.03 of its potential returns per unit of risk. ARCA Gold BUGS is currently generating about -0.05 per unit of risk. If you would invest  262.00  in Fluent Inc on September 18, 2024 and sell it today you would earn a total of  6.00  from holding Fluent Inc or generate 2.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Fluent Inc  vs.  ARCA Gold BUGS

Pair Trading with Fluent and ARCA Gold

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

The idea behind Fluent Inc and ARCA Gold BUGS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.