Correlation Between ADX and ARPA Chain

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

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

Diversification Opportunities for ADX and ARPA Chain

0.9

Correlation Coefficient

ADX  ARPA Chain

Almost no diversification

The 3 months correlation between ADX and ARPA is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding ADX and ARPA Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA Chain and ADX 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 ADX are associated (or correlated) with ARPA Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARPA Chain has no effect on the direction of ADX i.e., ADX and ARPA Chain go up and down completely randomly.

Pair Corralation between ADX and ARPA Chain

Assuming the 90 days trading horizon ADX is expected to under-perform the ARPA Chain. In addition to that, ADX is 1.11 times more volatile than ARPA Chain. It trades about -0.13 of its total potential returns per unit of risk. ARPA Chain is currently generating about -0.09 per unit of volatility. If you would invest  8.75  in ARPA Chain on January 26, 2024 and sell it today you would lose (1.52) from holding ARPA Chain or give up 17.37% of portfolio value over 90 days.

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

ADX  vs.  ARPA Chain

ADX

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADX are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ADX exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARPA Chain

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ARPA Chain are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ARPA Chain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADX and ARPA Chain

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

The idea behind ADX and ARPA Chain 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.