Correlation Between Ampleforth and ARPA Chain

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

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

Diversification Opportunities for Ampleforth and ARPA Chain

0.25

Correlation Coefficient

Ampleforth  ARPA Chain

Modest diversification

The 3 months correlation between Ampleforth and ARPA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ampleforth and ARPA Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA Chain and Ampleforth 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 Ampleforth 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 Ampleforth i.e., Ampleforth and ARPA Chain go up and down completely randomly.

Pair Corralation between Ampleforth and ARPA Chain

Assuming the 90 days trading horizon Ampleforth is expected to generate 1.54 times more return on investment than ARPA Chain. However, Ampleforth is 1.54 times more volatile than ARPA Chain. It trades about -0.01 of its potential returns per unit of risk. ARPA Chain is currently generating about -0.08 per unit of risk. If you would invest  135.00  in Ampleforth on January 24, 2024 and sell it today you would lose (19.00) from holding Ampleforth or give up 14.07% of portfolio value over 90 days.

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

Ampleforth  vs.  ARPA Chain

Ampleforth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ampleforth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ampleforth exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARPA Chain

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ARPA Chain are ranked lower than 6 (%) 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 Ampleforth and ARPA Chain

The main advantage of trading using opposite Ampleforth and ARPA Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ampleforth 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 Ampleforth 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.