Correlation Between Apogee Enterprises and Arlo Technologies

Can any of the company-specific risk be diversified away by investing in both Apogee Enterprises and Arlo Technologies 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 Apogee Enterprises and Arlo Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apogee Enterprises and Arlo Technologies, you can compare the effects of market volatilities on Apogee Enterprises and Arlo Technologies 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 Apogee Enterprises with a short position of Arlo Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apogee Enterprises and Arlo Technologies.

Diversification Opportunities for Apogee Enterprises and Arlo Technologies

0.39

Correlation Coefficient

Apogee Enterprises  Arlo Technologies

Weak diversification

The 3 months correlation between Apogee and Arlo is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and Arlo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlo Technologies and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with Arlo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlo Technologies has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and Arlo Technologies go up and down completely randomly.

Pair Corralation between Apogee Enterprises and Arlo Technologies

Given the investment horizon of 90 days Apogee Enterprises is expected to under-perform the Arlo Technologies. In addition to that, Apogee Enterprises is 1.77 times more volatile than Arlo Technologies. It trades about -0.43 of its total potential returns per unit of risk. Arlo Technologies is currently generating about -0.19 per unit of volatility. If you would invest  1,319  in Arlo Technologies on October 11, 2024 and sell it today you would lose (132.00) from holding Arlo Technologies or give up 10.01% of portfolio value over 90 days.

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

Apogee Enterprises  vs.  Arlo Technologies

Apogee Enterprises

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apogee Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Arlo Technologies

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arlo Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Arlo Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Apogee Enterprises and Arlo Technologies

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

The idea behind Apogee Enterprises and Arlo Technologies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.