Correlation Between Canlan Ice and Arm Holdings
Can any of the company-specific risk be diversified away by investing in both Canlan Ice and Arm 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 Canlan Ice and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canlan Ice Sports and Arm Holdings plc, you can compare the effects of market volatilities on Canlan Ice and Arm 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 Canlan Ice with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canlan Ice and Arm Holdings.
Diversification Opportunities for Canlan Ice and Arm Holdings
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Canlan and Arm is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Canlan Ice Sports and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Canlan Ice 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 Canlan Ice Sports are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Canlan Ice i.e., Canlan Ice and Arm Holdings go up and down completely randomly.
Pair Corralation between Canlan Ice and Arm Holdings
Assuming the 90 days horizon Canlan Ice is expected to generate 26.31 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, Canlan Ice Sports is 49.71 times less risky than Arm Holdings. It trades about 0.13 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,359 in Arm Holdings plc on August 30, 2024 and sell it today you would earn a total of 6,978 from holding Arm Holdings plc or generate 109.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 61.69% |
| Values | Daily Returns |
Canlan Ice Sports vs. Arm Holdings plc
Performance |
| Timeline |
| Canlan Ice Sports |
| Arm Holdings plc |
Canlan Ice and Arm Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canlan Ice and Arm Holdings
The main advantage of trading using opposite Canlan Ice and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canlan Ice position performs unexpectedly, Arm 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 Arm Holdings will offset losses from the drop in Arm Holdings' long position.The idea behind Canlan Ice Sports and Arm Holdings plc 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.| Arm Holdings vs. First Solar | Arm Holdings vs. Sunrun Inc | Arm Holdings vs. Canadian Solar | Arm Holdings vs. SolarEdge Technologies |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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