Correlation Between Honest and Arena Fortify

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

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

Diversification Opportunities for Honest and Arena Fortify

0.45

Correlation Coefficient

Honest  Arena Fortify

Very weak diversification

The 3 months correlation between Honest and Arena is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Arena Fortify Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Fortify Acquisition and Honest 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 Honest Company are associated (or correlated) with Arena Fortify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Fortify Acquisition has no effect on the direction of Honest i.e., Honest and Arena Fortify go up and down completely randomly.

Pair Corralation between Honest and Arena Fortify

Given the investment horizon of 90 days Honest Company is expected to generate 29.26 times more return on investment than Arena Fortify. However, Honest is 29.26 times more volatile than Arena Fortify Acquisition. It trades about 0.02 of its potential returns per unit of risk. Arena Fortify Acquisition is currently generating about 0.1 per unit of risk. If you would invest  385.00  in Honest Company on January 25, 2024 and sell it today you would lose (79.00) from holding Honest Company or give up 20.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	31.92%
Values	Daily Returns

Honest Company  vs.  Arena Fortify Acquisition

Honest Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arena Fortify Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arena Fortify Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Arena Fortify is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Honest and Arena Fortify

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

The idea behind Honest Company and Arena Fortify Acquisition 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.