Correlation Between Arena Group and EverQuote

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

Diversification Opportunities for Arena Group and EverQuote

0.79

Correlation Coefficient

Arena Group  EverQuote

Poor diversification

The 3 months correlation between Arena and EverQuote is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and EverQuote Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EverQuote Class A 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 EverQuote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EverQuote Class A has no effect on the direction of Arena Group i.e., Arena Group and EverQuote go up and down completely randomly.

Pair Corralation between Arena Group and EverQuote

Given the investment horizon of 90 days Arena Group is expected to generate 1.66 times less return on investment than EverQuote. In addition to that, Arena Group is 1.03 times more volatile than EverQuote Class A. It trades about 0.08 of its total potential returns per unit of risk. EverQuote Class A is currently generating about 0.14 per unit of volatility. If you would invest  1,969  in EverQuote Class A on December 29, 2024 and sell it today you would earn a total of  840.00  from holding EverQuote Class A or generate 42.66% return on investment over 90 days.

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

Arena Group Holdings  vs.  EverQuote Class A

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.

EverQuote Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EverQuote Class A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EverQuote reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arena Group and EverQuote

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

The idea behind Arena Group Holdings and EverQuote Class A 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.