Correlation Between ARB IOT and Data Storage

Can any of the company-specific risk be diversified away by investing in both ARB IOT and Data Storage 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 Data Storage 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 Data Storage, you can compare the effects of market volatilities on ARB IOT and Data Storage 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 Data Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARB IOT and Data Storage.

Diversification Opportunities for ARB IOT and Data Storage

-0.08

Correlation Coefficient

ARB IOT  Data Storage

Good diversification

The 3 months correlation between ARB and Data is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding ARB IOT Group and Data Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Data Storage 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 Data Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Data Storage has no effect on the direction of ARB IOT i.e., ARB IOT and Data Storage go up and down completely randomly.

Pair Corralation between ARB IOT and Data Storage

Given the investment horizon of 90 days ARB IOT Group is expected to generate 2.1 times more return on investment than Data Storage. However, ARB IOT is 2.1 times more volatile than Data Storage. It trades about 0.09 of its potential returns per unit of risk. Data Storage is currently generating about -0.18 per unit of risk. If you would invest  47.00  in ARB IOT Group on December 4, 2024 and sell it today you would earn a total of  5.00  from holding ARB IOT Group or generate 10.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

ARB IOT Group  vs.  Data Storage

ARB IOT Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 2 (%) 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.

Data Storage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Data Storage has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Data Storage is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ARB IOT and Data Storage

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

The idea behind ARB IOT Group and Data Storage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.