Correlation Between Arco Platform and Tarena Intl

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

By analyzing existing cross correlation between Arco Platform and Tarena Intl Adr, you can compare the effects of market volatilities on Arco Platform and Tarena Intl 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 Arco Platform with a short position of Tarena Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arco Platform and Tarena Intl.

Diversification Opportunities for Arco Platform and Tarena Intl

-0.56

Correlation Coefficient

Arco Platform  Tarena Intl

Excellent diversification

The 3 months correlation between Arco and Tarena is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Arco Platform and Tarena Intl Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tarena Intl Adr and Arco Platform 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 Arco Platform are associated (or correlated) with Tarena Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tarena Intl Adr has no effect on the direction of Arco Platform i.e., Arco Platform and Tarena Intl go up and down completely randomly.

Pair Corralation between Arco Platform and Tarena Intl

Given the investment horizon of 90 days Arco Platform is expected to generate 0.5 times more return on investment than Tarena Intl. However, Arco Platform is 2.02 times less risky than Tarena Intl. It trades about 0.0 of its potential returns per unit of risk. Tarena Intl Adr is currently generating about -0.07 per unit of risk. If you would invest  1,350  in Arco Platform on September 20, 2024 and sell it today you would lose (63.00) from holding Arco Platform or give up 4.67% of portfolio value over 90 days.

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

Arco Platform  vs.  Tarena Intl Adr

Arco Platform

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arco Platform has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Arco Platform is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Tarena Intl Adr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tarena Intl Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Tarena Intl is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arco Platform and Tarena Intl

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

The idea behind Arco Platform and Tarena Intl Adr 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.