Correlation Between Arm Holdings and Interactive Brokers

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

Diversification Opportunities for Arm Holdings and Interactive Brokers

0.78

Correlation Coefficient

Arm Holdings  Interactive Brokers

Poor diversification

The 3 months correlation between Arm and Interactive is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Interactive Brokers Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Brokers 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 Interactive Brokers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Brokers has no effect on the direction of Arm Holdings i.e., Arm Holdings and Interactive Brokers go up and down completely randomly.

Pair Corralation between Arm Holdings and Interactive Brokers

Considering the 90-day investment horizon Arm Holdings plc is expected to under-perform the Interactive Brokers. In addition to that, Arm Holdings is 1.37 times more volatile than Interactive Brokers Group. It trades about -0.02 of its total potential returns per unit of risk. Interactive Brokers Group is currently generating about 0.02 per unit of volatility. If you would invest  17,570  in Interactive Brokers Group on December 20, 2024 and sell it today you would earn a total of  245.00  from holding Interactive Brokers Group or generate 1.39% return on investment over 90 days.

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

Arm Holdings plc  vs.  Interactive Brokers Group

Arm Holdings plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arm Holdings plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Interactive Brokers

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Brokers Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Interactive Brokers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Arm Holdings and Interactive Brokers

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

The idea behind Arm Holdings plc and Interactive Brokers Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.