Correlation Between Arbor Metals and Dream Industrial

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

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

Diversification Opportunities for Arbor Metals and Dream Industrial

0.2

Correlation Coefficient

Arbor Metals  Dream Industrial

Modest diversification

The 3 months correlation between Arbor and Dream is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and Dream Industrial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Industrial Real and Arbor Metals 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 Metals Corp are associated (or correlated) with Dream Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Industrial Real has no effect on the direction of Arbor Metals i.e., Arbor Metals and Dream Industrial go up and down completely randomly.

Pair Corralation between Arbor Metals and Dream Industrial

Assuming the 90 days horizon Arbor Metals Corp is expected to generate 10.35 times more return on investment than Dream Industrial. However, Arbor Metals is 10.35 times more volatile than Dream Industrial Real. It trades about 0.1 of its potential returns per unit of risk. Dream Industrial Real is currently generating about -0.03 per unit of risk. If you would invest  23.00  in Arbor Metals Corp on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Arbor Metals Corp or generate 39.13% return on investment over 90 days.

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

Arbor Metals Corp  vs.  Dream Industrial Real

Arbor Metals Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Metals Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Metals showed solid returns over the last few months and may actually be approaching a breakup point.

Dream Industrial Real

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dream Industrial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dream Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arbor Metals and Dream Industrial

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

The idea behind Arbor Metals Corp and Dream Industrial Real 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.