Correlation Between AD Plastik and Arena Hospitality

Can any of the company-specific risk be diversified away by investing in both AD Plastik and Arena Hospitality 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 AD Plastik and Arena Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AD Plastik dd and Arena Hospitality Group, you can compare the effects of market volatilities on AD Plastik and Arena Hospitality 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 AD Plastik with a short position of Arena Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of AD Plastik and Arena Hospitality.

Diversification Opportunities for AD Plastik and Arena Hospitality

0.53

Correlation Coefficient

AD Plastik  Arena Hospitality

Very weak diversification

The 3 months correlation between ADPL and Arena is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding AD Plastik dd and Arena Hospitality Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Hospitality and AD Plastik 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 AD Plastik dd are associated (or correlated) with Arena Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Hospitality has no effect on the direction of AD Plastik i.e., AD Plastik and Arena Hospitality go up and down completely randomly.

Pair Corralation between AD Plastik and Arena Hospitality

Assuming the 90 days trading horizon AD Plastik is expected to generate 1.04 times less return on investment than Arena Hospitality. In addition to that, AD Plastik is 2.44 times more volatile than Arena Hospitality Group. It trades about 0.06 of its total potential returns per unit of risk. Arena Hospitality Group is currently generating about 0.16 per unit of volatility. If you would invest  3,160  in Arena Hospitality Group on December 30, 2024 and sell it today you would earn a total of  340.00  from holding Arena Hospitality Group or generate 10.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.26%
Values	Daily Returns

AD Plastik dd  vs.  Arena Hospitality Group

AD Plastik dd

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AD Plastik dd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AD Plastik unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arena Hospitality

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Hospitality Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Arena Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AD Plastik and Arena Hospitality

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

The idea behind AD Plastik dd and Arena Hospitality Group 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.