Correlation Between Arena Group and Locafy

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

Diversification Opportunities for Arena Group and Locafy

-0.75

Correlation Coefficient

Arena Group  Locafy

Pay attention - limited upside

The 3 months correlation between Arena and Locafy is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Arena Group Holdings and Locafy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy 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 Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy has no effect on the direction of Arena Group i.e., Arena Group and Locafy go up and down completely randomly.

Pair Corralation between Arena Group and Locafy

Given the investment horizon of 90 days Arena Group Holdings is expected to generate 0.86 times more return on investment than Locafy. However, Arena Group Holdings is 1.16 times less risky than Locafy. It trades about 0.09 of its potential returns per unit of risk. Locafy is currently generating about -0.03 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	Weak
Accuracy	100.0%
Values	Daily Returns

Arena Group Holdings  vs.  Locafy

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.

Locafy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Locafy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Arena Group and Locafy

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

The idea behind Arena Group Holdings and Locafy 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.