Correlation Between Applied Digital and Arena Group

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

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

Diversification Opportunities for Applied Digital and Arena Group

0.17

Correlation Coefficient

Applied Digital  Arena Group

Average diversification

The 3 months correlation between Applied and Arena is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Arena Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Group Holdings and Applied Digital 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 Applied Digital are associated (or correlated) with Arena Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Group Holdings has no effect on the direction of Applied Digital i.e., Applied Digital and Arena Group go up and down completely randomly.

Pair Corralation between Applied Digital and Arena Group

Given the investment horizon of 90 days Applied Digital is expected to under-perform the Arena Group. In addition to that, Applied Digital is 1.22 times more volatile than Arena Group Holdings. It trades about 0.0 of its total potential returns per unit of risk. Arena Group Holdings is currently generating about 0.05 per unit of volatility. If you would invest  147.00  in Arena Group Holdings on December 2, 2024 and sell it today you would earn a total of  14.00  from holding Arena Group Holdings or generate 9.52% return on investment over 90 days.

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

Applied Digital  vs.  Arena Group Holdings

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Applied Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arena Group Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Digital and Arena Group

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

The idea behind Applied Digital and Arena Group Holdings 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.