Correlation Between ARIP Public and Dimet Public

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

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

Diversification Opportunities for ARIP Public and Dimet Public

0.28

Correlation Coefficient

ARIP Public  Dimet Public

Modest diversification

The 3 months correlation between ARIP and Dimet is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ARIP Public and Dimet Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimet Public and ARIP Public 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 ARIP Public are associated (or correlated) with Dimet Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimet Public has no effect on the direction of ARIP Public i.e., ARIP Public and Dimet Public go up and down completely randomly.

Pair Corralation between ARIP Public and Dimet Public

Assuming the 90 days trading horizon ARIP Public is expected to generate 0.62 times more return on investment than Dimet Public. However, ARIP Public is 1.6 times less risky than Dimet Public. It trades about -0.04 of its potential returns per unit of risk. Dimet Public is currently generating about -0.1 per unit of risk. If you would invest  53.00  in ARIP Public on December 29, 2024 and sell it today you would lose (12.00) from holding ARIP Public or give up 22.64% of portfolio value over 90 days.

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

ARIP Public  vs.  Dimet Public

ARIP Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARIP Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dimet Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dimet Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain somewhat 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 ARIP Public and Dimet Public

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

The idea behind ARIP Public and Dimet Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.