Correlation Between Arima Communications and Thermaltake Technology
Can any of the company-specific risk be diversified away by investing in both Arima Communications and Thermaltake Technology 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 Arima Communications and Thermaltake Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arima Communications Corp and Thermaltake Technology Co, you can compare the effects of market volatilities on Arima Communications and Thermaltake Technology 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 Arima Communications with a short position of Thermaltake Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and Thermaltake Technology.
Diversification Opportunities for Arima Communications and Thermaltake Technology
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Arima and Thermaltake is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and Thermaltake Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermaltake Technology and Arima Communications 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 Arima Communications Corp are associated (or correlated) with Thermaltake Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermaltake Technology has no effect on the direction of Arima Communications i.e., Arima Communications and Thermaltake Technology go up and down completely randomly.
Pair Corralation between Arima Communications and Thermaltake Technology
Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 1.83 times more return on investment than Thermaltake Technology. However, Arima Communications is 1.83 times more volatile than Thermaltake Technology Co. It trades about 0.4 of its potential returns per unit of risk. Thermaltake Technology Co is currently generating about -0.03 per unit of risk. If you would invest 950.00 in Arima Communications Corp on September 3, 2024 and sell it today you would earn a total of 1,260 from holding Arima Communications Corp or generate 132.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arima Communications Corp vs. Thermaltake Technology Co
Performance |
| Timeline |
| Arima Communications Corp |
| Thermaltake Technology |
Arima Communications and Thermaltake Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arima Communications and Thermaltake Technology
The main advantage of trading using opposite Arima Communications and Thermaltake Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arima Communications position performs unexpectedly, Thermaltake Technology 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 Thermaltake Technology will offset losses from the drop in Thermaltake Technology's long position.| Arima Communications vs. Taiwan Semiconductor Manufacturing | Arima Communications vs. Yang Ming Marine | Arima Communications vs. ASE Industrial Holding | Arima Communications vs. AU Optronics |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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