Correlation Between Arm Holdings and Globalfoundries

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

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

Diversification Opportunities for Arm Holdings and Globalfoundries

-0.25

Correlation Coefficient

Arm Holdings  Globalfoundries

Very good diversification

The 3 months correlation between Arm and Globalfoundries is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries and Arm Holdings 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 Arm Holdings plc are associated (or correlated) with Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of Arm Holdings i.e., Arm Holdings and Globalfoundries go up and down completely randomly.

Pair Corralation between Arm Holdings and Globalfoundries

Considering the 90-day investment horizon Arm Holdings is expected to generate 2.57 times less return on investment than Globalfoundries. In addition to that, Arm Holdings is 1.08 times more volatile than Globalfoundries. It trades about 0.02 of its total potential returns per unit of risk. Globalfoundries is currently generating about 0.05 per unit of volatility. If you would invest  4,137  in Globalfoundries on October 6, 2024 and sell it today you would earn a total of  181.00  from holding Globalfoundries or generate 4.38% return on investment over 90 days.

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

Arm Holdings plc  vs.  Globalfoundries

Arm Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

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

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Arm Holdings and Globalfoundries

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

The idea behind Arm Holdings plc and Globalfoundries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.