Correlation Between Argan and Api GroupCorp

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

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

Diversification Opportunities for Argan and Api GroupCorp

0.65

Correlation Coefficient

Argan  Api GroupCorp

Poor diversification

The 3 months correlation between Argan and Api is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Argan Inc and Api GroupCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Api GroupCorp and Argan 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 Argan Inc are associated (or correlated) with Api GroupCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Api GroupCorp has no effect on the direction of Argan i.e., Argan and Api GroupCorp go up and down completely randomly.

Pair Corralation between Argan and Api GroupCorp

Considering the 90-day investment horizon Argan Inc is expected to generate 2.8 times more return on investment than Api GroupCorp. However, Argan is 2.8 times more volatile than Api GroupCorp. It trades about 0.21 of its potential returns per unit of risk. Api GroupCorp is currently generating about -0.06 per unit of risk. If you would invest  5,025  in Argan Inc on January 20, 2024 and sell it today you would earn a total of  1,074  from holding Argan Inc or generate 21.37% return on investment over 90 days.

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

Argan Inc  vs.  Api GroupCorp

Argan Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Api GroupCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Api GroupCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Api GroupCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Argan and Api GroupCorp

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

The idea behind Argan Inc and Api GroupCorp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.