Correlation Between ARDR and API3

Can any of the company-specific risk be diversified away by investing in both ARDR and API3 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 ARDR and API3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ARDR and API3, you can compare the effects of market volatilities on ARDR and API3 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 ARDR with a short position of API3. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARDR and API3.

Diversification Opportunities for ARDR and API3

0.18

Correlation Coefficient

ARDR  API3

Average diversification

The 3 months correlation between ARDR and API3 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding ARDR and API3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on API3 and ARDR 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 ARDR are associated (or correlated) with API3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of API3 has no effect on the direction of ARDR i.e., ARDR and API3 go up and down completely randomly.

Pair Corralation between ARDR and API3

Assuming the 90 days trading horizon ARDR is expected to generate 0.9 times more return on investment than API3. However, ARDR is 1.12 times less risky than API3. It trades about 0.07 of its potential returns per unit of risk. API3 is currently generating about -0.05 per unit of risk. If you would invest  8.65  in ARDR on February 11, 2024 and sell it today you would earn a total of  1.35  from holding ARDR or generate 15.61% return on investment over 90 days.

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

ARDR  vs.  API3

ARDR

Risk-Adjusted Performance

5 of 100

Modest

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

API3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days API3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for API3 shareholders.

Pair Trading with ARDR and API3

The main advantage of trading using opposite ARDR and API3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARDR position performs unexpectedly, API3 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 API3 will offset losses from the drop in API3's long position.

The idea behind ARDR and API3 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.