Correlation Between Armada Hflr and Scholar Rock
Can any of the company-specific risk be diversified away by investing in both Armada Hflr and Scholar Rock 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 Armada Hflr and Scholar Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armada Hflr Pr and Scholar Rock Holding, you can compare the effects of market volatilities on Armada Hflr and Scholar Rock 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 Armada Hflr with a short position of Scholar Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Scholar Rock.
Diversification Opportunities for Armada Hflr and Scholar Rock
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Armada and Scholar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Scholar Rock Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholar Rock Holding and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Scholar Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholar Rock Holding has no effect on the direction of Armada Hflr i.e., Armada Hflr and Scholar Rock go up and down completely randomly.
Pair Corralation between Armada Hflr and Scholar Rock
Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the Scholar Rock. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 8.58 times less risky than Scholar Rock. The stock trades about -0.13 of its potential returns per unit of risk. The Scholar Rock Holding is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 2,638 in Scholar Rock Holding on September 18, 2024 and sell it today you would earn a total of 1,705 from holding Scholar Rock Holding or generate 64.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Armada Hflr Pr vs. Scholar Rock Holding
Performance |
| Timeline |
| Armada Hflr Pr |
| Scholar Rock Holding |
Armada Hflr and Scholar Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armada Hflr and Scholar Rock
The main advantage of trading using opposite Armada Hflr and Scholar Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr position performs unexpectedly, Scholar Rock 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 Scholar Rock will offset losses from the drop in Scholar Rock's long position.The idea behind Armada Hflr Pr and Scholar Rock Holding 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.
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