Correlation Between ARB IOT and CSP

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

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

Diversification Opportunities for ARB IOT and CSP

-0.42

Correlation Coefficient

ARB IOT  CSP

Very good diversification

The 3 months correlation between ARB and CSP is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ARB IOT Group and CSP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSP Inc and ARB IOT 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 ARB IOT Group are associated (or correlated) with CSP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSP Inc has no effect on the direction of ARB IOT i.e., ARB IOT and CSP go up and down completely randomly.

Pair Corralation between ARB IOT and CSP

Given the investment horizon of 90 days ARB IOT Group is expected to generate 3.02 times more return on investment than CSP. However, ARB IOT is 3.02 times more volatile than CSP Inc. It trades about 0.11 of its potential returns per unit of risk. CSP Inc is currently generating about 0.02 per unit of risk. If you would invest  45.00  in ARB IOT Group on December 27, 2024 and sell it today you would earn a total of  23.00  from holding ARB IOT Group or generate 51.11% return on investment over 90 days.

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

ARB IOT Group  vs.  CSP Inc

ARB IOT Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

CSP Inc

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CSP Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, CSP is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ARB IOT and CSP

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

The idea behind ARB IOT Group and CSP Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.