Correlation Between Antero Midstream and Arm Holdings

Can any of the company-specific risk be diversified away by investing in both Antero Midstream 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 Antero Midstream and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Antero Midstream Partners and Arm Holdings plc, you can compare the effects of market volatilities on Antero Midstream 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 Antero Midstream with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Antero Midstream and Arm Holdings.

Diversification Opportunities for Antero Midstream and Arm Holdings

-0.17

Correlation Coefficient

Antero Midstream  Arm Holdings

Good diversification

The 3 months correlation between Antero and Arm is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners 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 Antero Midstream 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 Antero Midstream Partners 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 Antero Midstream i.e., Antero Midstream and Arm Holdings go up and down completely randomly.

Pair Corralation between Antero Midstream and Arm Holdings

Allowing for the 90-day total investment horizon Antero Midstream is expected to generate 2.89 times less return on investment than Arm Holdings. But when comparing it to its historical volatility, Antero Midstream Partners is 4.02 times less risky than Arm Holdings. It trades about 0.09 of its potential returns per unit of risk. Arm Holdings plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,359  in Arm Holdings plc on October 3, 2024 and sell it today you would earn a total of  5,977  from holding Arm Holdings plc or generate 93.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.42%
Values	Daily Returns

Antero Midstream Partners  vs.  Arm Holdings plc

Antero Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antero Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Arm Holdings plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Antero Midstream and Arm Holdings

The main advantage of trading using opposite Antero Midstream and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Antero Midstream 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 Antero Midstream Partners 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.

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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 Stocks Directory module to find actively traded stocks across global markets.