Correlation Between Vroom and Arch Resources

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Can any of the company-specific risk be diversified away by investing in both Vroom and Arch Resources 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 Vroom and Arch Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vroom Inc and Arch Resources, you can compare the effects of market volatilities on Vroom and Arch Resources 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 Vroom with a short position of Arch Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vroom and Arch Resources.

Diversification Opportunities for Vroom and Arch Resources

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Vroom and Arch Resources is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vroom Inc and Arch Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Resources and Vroom 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 Vroom Inc are associated (or correlated) with Arch Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Resources has no effect on the direction of Vroom i.e., Vroom and Arch Resources go up and down completely randomly.

Pair Corralation between Vroom and Arch Resources

Considering the 90-day investment horizon Vroom Inc is expected to generate 2.37 times more return on investment than Arch Resources. However, Vroom is 2.37 times more volatile than Arch Resources. It trades about 0.2 of its potential returns per unit of risk. Arch Resources is currently generating about -0.03 per unit of risk. If you would invest  91.00  in Vroom Inc on September 6, 2022 and sell it today you would earn a total of  25.00  from holding Vroom Inc or generate 27.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Vroom Inc  vs.  Arch Resources

 Performance (%) 
       Timeline  
Vroom Inc 
Vroom Performance
0 of 100
Over the last 90 days Vroom Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively steady which may send shares a bit higher in January 2023. The new chaos may also be a sign of medium-term up-swing for the company stakeholders.

Vroom Price Channel

Arch Resources 
Arch Resources Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arch Resources are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Arch Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Arch Resources Price Channel

Vroom and Arch Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vroom and Arch Resources

The main advantage of trading using opposite Vroom and Arch Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vroom position performs unexpectedly, Arch Resources 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 Arch Resources will offset losses from the drop in Arch Resources' long position.
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The idea behind Vroom Inc and Arch Resources 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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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 CEO Directory module to screen CEOs from public companies around the world.

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