Correlation Between Arena Group and Cheetah Mobile

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

Diversification Opportunities for Arena Group and Cheetah Mobile

0.43

Correlation Coefficient

Arena Group  Cheetah Mobile

Very weak diversification

The 3 months correlation between Arena and Cheetah is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and Cheetah Mobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Mobile 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 Cheetah Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Mobile has no effect on the direction of Arena Group i.e., Arena Group and Cheetah Mobile go up and down completely randomly.

Pair Corralation between Arena Group and Cheetah Mobile

Given the investment horizon of 90 days Arena Group Holdings is expected to generate 1.07 times more return on investment than Cheetah Mobile. However, Arena Group is 1.07 times more volatile than Cheetah Mobile. It trades about 0.03 of its potential returns per unit of risk. Cheetah Mobile is currently generating about 0.02 per unit of risk. If you would invest  150.00  in Arena Group Holdings on November 29, 2024 and sell it today you would earn a total of  1.00  from holding Arena Group Holdings or generate 0.67% return on investment over 90 days.

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

Arena Group Holdings  vs.  Cheetah Mobile

Arena Group Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Group Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Arena Group may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Cheetah Mobile

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cheetah Mobile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Cheetah Mobile is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Arena Group and Cheetah Mobile

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

The idea behind Arena Group Holdings and Cheetah Mobile 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.