Correlation Between Arena Group and Applied Digital

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

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

Diversification Opportunities for Arena Group and Applied Digital

-0.41

Correlation Coefficient

Arena Group  Applied Digital

Very good diversification

The 3 months correlation between Arena and Applied is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and Applied Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Digital and Arena Group 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 Arena Group Holdings are associated (or correlated) with Applied Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Digital has no effect on the direction of Arena Group i.e., Arena Group and Applied Digital go up and down completely randomly.

Pair Corralation between Arena Group and Applied Digital

Given the investment horizon of 90 days Arena Group Holdings is expected to generate 0.67 times more return on investment than Applied Digital. However, Arena Group Holdings is 1.5 times less risky than Applied Digital. It trades about 0.09 of its potential returns per unit of risk. Applied Digital is currently generating about 0.0 per unit of risk. If you would invest  141.00  in Arena Group Holdings on December 28, 2024 and sell it today you would earn a total of  31.00  from holding Arena Group Holdings or generate 21.99% return on investment over 90 days.

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

Arena Group Holdings  vs.  Applied Digital

Arena Group Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Applied Digital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Arena Group and Applied Digital

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

The idea behind Arena Group Holdings and Applied Digital 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.