Correlation Between ARPA Chain and ARDR

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

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

Diversification Opportunities for ARPA Chain and ARDR

0.94

Correlation Coefficient

ARPA Chain  ARDR

Almost no diversification

The 3 months correlation between ARPA and ARDR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding ARPA Chain and ARDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARDR and ARPA Chain 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 ARPA Chain are associated (or correlated) with ARDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARDR has no effect on the direction of ARPA Chain i.e., ARPA Chain and ARDR go up and down completely randomly.

Pair Corralation between ARPA Chain and ARDR

Assuming the 90 days trading horizon ARPA Chain is expected to under-perform the ARDR. In addition to that, ARPA Chain is 1.03 times more volatile than ARDR. It trades about -0.09 of its total potential returns per unit of risk. ARDR is currently generating about -0.08 per unit of volatility. 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

ARPA Chain  vs.  ARDR

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.

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.

Pair Trading with ARPA Chain and ARDR

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

The idea behind ARPA Chain and ARDR 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.