Correlation Between Arm Holdings and Infineon Technologies

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

Diversification Opportunities for Arm Holdings and Infineon Technologies

-0.65

Correlation Coefficient

Arm Holdings  Infineon Technologies

Excellent diversification

The 3 months correlation between Arm and Infineon is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies 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 Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of Arm Holdings i.e., Arm Holdings and Infineon Technologies go up and down completely randomly.

Pair Corralation between Arm Holdings and Infineon Technologies

If you would invest  6,489  in Arm Holdings plc on October 5, 2024 and sell it today you would earn a total of  6,331  from holding Arm Holdings plc or generate 97.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.37%
Values	Daily Returns

Arm Holdings plc  vs.  Infineon Technologies AG

Arm Holdings plc

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Infineon Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infineon Technologies AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Infineon Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Arm Holdings and Infineon Technologies

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

The idea behind Arm Holdings plc and Infineon Technologies AG 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.