Correlation Between Arima Communications and Gamania Digital

Can any of the company-specific risk be diversified away by investing in both Arima Communications and Gamania Digital 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 Gamania Digital 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 Gamania Digital Entertainment, you can compare the effects of market volatilities on Arima Communications and Gamania Digital 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 Gamania Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arima Communications and Gamania Digital.

Diversification Opportunities for Arima Communications and Gamania Digital

0.61

Correlation Coefficient

Arima Communications  Gamania Digital

Poor diversification

The 3 months correlation between Arima and Gamania is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arima Communications Corp and Gamania Digital Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gamania Digital Ente 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 Gamania Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gamania Digital Ente has no effect on the direction of Arima Communications i.e., Arima Communications and Gamania Digital go up and down completely randomly.

Pair Corralation between Arima Communications and Gamania Digital

Assuming the 90 days trading horizon Arima Communications Corp is expected to generate 10.66 times more return on investment than Gamania Digital. However, Arima Communications is 10.66 times more volatile than Gamania Digital Entertainment. It trades about 0.04 of its potential returns per unit of risk. Gamania Digital Entertainment is currently generating about 0.05 per unit of risk. If you would invest  600.00  in Arima Communications Corp on September 3, 2024 and sell it today you would earn a total of  1,610  from holding Arima Communications Corp or generate 268.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Arima Communications Corp  vs.  Gamania Digital Entertainment

Arima Communications Corp

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Arima Communications Corp are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arima Communications showed solid returns over the last few months and may actually be approaching a breakup point.

Gamania Digital Ente

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gamania Digital Entertainment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gamania Digital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arima Communications and Gamania Digital

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

The idea behind Arima Communications Corp and Gamania Digital Entertainment 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.