Correlation Between Arbor Technology and Maxigen Biotech

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

By analyzing existing cross correlation between Arbor Technology and Maxigen Biotech, you can compare the effects of market volatilities on Arbor Technology and Maxigen Biotech 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 Arbor Technology with a short position of Maxigen Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Technology and Maxigen Biotech.

Diversification Opportunities for Arbor Technology and Maxigen Biotech

0.83

Correlation Coefficient

Arbor Technology  Maxigen Biotech

Very poor diversification

The 3 months correlation between Arbor and Maxigen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Technology and Maxigen Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxigen Biotech and Arbor Technology 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 Arbor Technology are associated (or correlated) with Maxigen Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxigen Biotech has no effect on the direction of Arbor Technology i.e., Arbor Technology and Maxigen Biotech go up and down completely randomly.

Pair Corralation between Arbor Technology and Maxigen Biotech

Assuming the 90 days trading horizon Arbor Technology is expected to generate 1.54 times more return on investment than Maxigen Biotech. However, Arbor Technology is 1.54 times more volatile than Maxigen Biotech. It trades about 0.03 of its potential returns per unit of risk. Maxigen Biotech is currently generating about 0.04 per unit of risk. If you would invest  4,335  in Arbor Technology on October 24, 2024 and sell it today you would earn a total of  515.00  from holding Arbor Technology or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.59%
Values	Daily Returns

Arbor Technology  vs.  Maxigen Biotech

Arbor Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Technology are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Maxigen Biotech

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Maxigen Biotech are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Maxigen Biotech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbor Technology and Maxigen Biotech

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

The idea behind Arbor Technology and Maxigen Biotech 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.