Correlation Between Arbitrum and DF

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

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

Diversification Opportunities for Arbitrum and DF

-0.4

Correlation Coefficient

Arbitrum  DF

Very good diversification

The 3 months correlation between Arbitrum and DF is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and DF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DF 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 DF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DF has no effect on the direction of Arbitrum i.e., Arbitrum and DF go up and down completely randomly.

Pair Corralation between Arbitrum and DF

Assuming the 90 days trading horizon Arbitrum is expected to under-perform the DF. But the crypto coin apears to be less risky and, when comparing its historical volatility, Arbitrum is 3.45 times less risky than DF. The crypto coin trades about -0.16 of its potential returns per unit of risk. The DF is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.56  in DF on December 29, 2024 and sell it today you would lose (1.53) from holding DF or give up 42.98% of portfolio value over 90 days.

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

Arbitrum  vs.  DF

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.

DF

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Arbitrum and DF

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

The idea behind Arbitrum and DF 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.