Correlation Between Arbitrum and CVC

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

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

Diversification Opportunities for Arbitrum and CVC

0.94

Correlation Coefficient

Arbitrum  CVC

Almost no diversification

The 3 months correlation between Arbitrum and CVC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and CVC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC and Arbitrum 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 Arbitrum are associated (or correlated) with CVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC has no effect on the direction of Arbitrum i.e., Arbitrum and CVC go up and down completely randomly.

Pair Corralation between Arbitrum and CVC

Assuming the 90 days trading horizon Arbitrum is expected to generate 1.3 times more return on investment than CVC. However, Arbitrum is 1.3 times more volatile than CVC. It trades about -0.17 of its potential returns per unit of risk. CVC is currently generating about -0.26 per unit of risk. If you would invest  72.00  in Arbitrum on December 29, 2024 and sell it today you would lose (39.00) from holding Arbitrum or give up 54.17% of portfolio value over 90 days.

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

Arbitrum  vs.  CVC

Arbitrum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arbitrum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Arbitrum shareholders.

CVC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for CVC shareholders.

Pair Trading with Arbitrum and CVC

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

The idea behind Arbitrum and CVC 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.