Correlation Between ARDR and ARPA Chain

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

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

Diversification Opportunities for ARDR and ARPA Chain

0.94

Correlation Coefficient

ARDR  ARPA Chain

Almost no diversification

The 3 months correlation between ARDR and ARPA is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ARDR and ARPA Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA Chain 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 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 ARDR i.e., ARDR and ARPA Chain go up and down completely randomly.

Pair Corralation between ARDR and ARPA Chain

Assuming the 90 days trading horizon ARDR is expected to generate 0.97 times more return on investment than ARPA Chain. However, ARDR is 1.03 times less risky than ARPA Chain. It trades about -0.08 of its potential returns per unit of risk. ARPA Chain is currently generating about -0.09 per unit of risk. If you would invest  13.00  in ARDR on January 26, 2024 and sell it today you would lose (2.00) from holding ARDR or give up 15.38% of portfolio value over 90 days.

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

ARDR  vs.  ARPA Chain

ARDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ARDR are ranked lower than 6 (%) 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.

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 ARDR and ARPA Chain

The main advantage of trading using opposite ARDR and ARPA Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ARDR 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 ARDR 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.

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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.