Correlation Between Arima Communications and WPG Holdings
Can any of the company-specific risk be diversified away by investing in both Arima Communications and WPG Holdings 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 WPG Holdings 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 WPG Holdings, you can compare the effects of market volatilities on Arima Communications and WPG Holdings 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 WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and WPG Holdings.
Diversification Opportunities for Arima Communications and WPG Holdings
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Arima and WPG is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings 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 WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Arima Communications i.e., Arima Communications and WPG Holdings go up and down completely randomly.
Pair Corralation between Arima Communications and WPG Holdings
Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 64.34 times more return on investment than WPG Holdings. However, Arima Communications is 64.34 times more volatile than WPG Holdings. It trades about 0.07 of its potential returns per unit of risk. WPG Holdings is currently generating about 0.14 per unit of risk. If you would invest 409.00 in Arima Communications Corp on September 4, 2024 and sell it today you would earn a total of 2,261 from holding Arima Communications Corp or generate 552.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arima Communications Corp vs. WPG Holdings
Performance |
| Timeline |
| Arima Communications Corp |
| WPG Holdings |
Arima Communications and WPG Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arima Communications and WPG Holdings
The main advantage of trading using opposite Arima Communications and WPG Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arima Communications position performs unexpectedly, WPG Holdings 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 WPG Holdings will offset losses from the drop in WPG Holdings' long position.| Arima Communications vs. Taiwan Semiconductor Manufacturing | Arima Communications vs. Yang Ming Marine | Arima Communications vs. AU Optronics | Arima Communications vs. Nan Ya Plastics |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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