Correlation Between ARPA Chain and SNM

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

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

Diversification Opportunities for ARPA Chain and SNM

-0.16

Correlation Coefficient

ARPA Chain  SNM

Good diversification

The 3 months correlation between ARPA and SNM is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding ARPA Chain and SNM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNM 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 SNM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNM has no effect on the direction of ARPA Chain i.e., ARPA Chain and SNM go up and down completely randomly.

Pair Corralation between ARPA Chain and SNM

Assuming the 90 days trading horizon ARPA Chain is expected to under-perform the SNM. In addition to that, ARPA Chain is 1.83 times more volatile than SNM. It trades about -0.08 of its total potential returns per unit of risk. SNM is currently generating about -0.11 per unit of volatility. If you would invest  0.35  in SNM on January 25, 2024 and sell it today you would lose (0.04) from holding SNM or give up 10.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

ARPA Chain  vs.  SNM

ARPA Chain

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ARPA Chain are ranked lower than 5 (%) 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.

SNM

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with ARPA Chain and SNM

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

The idea behind ARPA Chain and SNM 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.