Correlation Between Arbitrum and MTA

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

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

Diversification Opportunities for Arbitrum and MTA

-0.67

Correlation Coefficient

Arbitrum  MTA

Excellent diversification

The 3 months correlation between Arbitrum and MTA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and MTA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTA 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 MTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTA has no effect on the direction of Arbitrum i.e., Arbitrum and MTA go up and down completely randomly.

Pair Corralation between Arbitrum and MTA

Assuming the 90 days trading horizon Arbitrum is expected to under-perform the MTA. But the crypto coin apears to be less risky and, when comparing its historical volatility, Arbitrum is 2.59 times less risky than MTA. The crypto coin trades about -0.19 of its potential returns per unit of risk. The MTA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.99  in MTA on December 2, 2024 and sell it today you would earn a total of  0.86  from holding MTA or generate 43.22% return on investment over 90 days.

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

Arbitrum  vs.  MTA

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.

MTA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MTA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbitrum and MTA

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

The idea behind Arbitrum and MTA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.