Correlation Between Arbitrum and SUN

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

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

Diversification Opportunities for Arbitrum and SUN

0.97

Correlation Coefficient

Arbitrum  SUN

Almost no diversification

The 3 months correlation between Arbitrum and SUN is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and SUN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUN 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 SUN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUN has no effect on the direction of Arbitrum i.e., Arbitrum and SUN go up and down completely randomly.

Pair Corralation between Arbitrum and SUN

Assuming the 90 days trading horizon Arbitrum is expected to under-perform the SUN. In addition to that, Arbitrum is 1.22 times more volatile than SUN. It trades about -0.17 of its total potential returns per unit of risk. SUN is currently generating about -0.1 per unit of volatility. If you would invest  2.45  in SUN on December 29, 2024 and sell it today you would lose (0.80) from holding SUN or give up 32.65% 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.  SUN

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.

SUN

Risk-Adjusted Performance

Very Weak

Over the last 90 days SUN 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 basic 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 SUN shareholders.

Pair Trading with Arbitrum and SUN

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

The idea behind Arbitrum and SUN 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.