Correlation Between CompoSecure and Arbor Metals

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

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

Diversification Opportunities for CompoSecure and Arbor Metals

-0.53

Correlation Coefficient

CompoSecure  Arbor Metals

Excellent diversification

The 3 months correlation between CompoSecure and Arbor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Arbor Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbor Metals Corp and CompoSecure 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 CompoSecure are associated (or correlated) with Arbor Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbor Metals Corp has no effect on the direction of CompoSecure i.e., CompoSecure and Arbor Metals go up and down completely randomly.

Pair Corralation between CompoSecure and Arbor Metals

Given the investment horizon of 90 days CompoSecure is expected to generate 0.5 times more return on investment than Arbor Metals. However, CompoSecure is 2.01 times less risky than Arbor Metals. It trades about 0.06 of its potential returns per unit of risk. Arbor Metals Corp is currently generating about -0.07 per unit of risk. If you would invest  634.00  in CompoSecure on January 20, 2024 and sell it today you would earn a total of  19.00  from holding CompoSecure or generate 3.0% return on investment over 90 days.

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

CompoSecure  vs.  Arbor Metals Corp

CompoSecure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, CompoSecure displayed solid returns over the last few months and may actually be approaching a breakup point.

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CompoSecure and Arbor Metals

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

The idea behind CompoSecure and Arbor Metals Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..