Correlation Between Arm Holdings and Logility Supply

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

Diversification Opportunities for Arm Holdings and Logility Supply

-0.16

Correlation Coefficient

Arm Holdings  Logility Supply

Good diversification

The 3 months correlation between Arm and Logility is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Logility Supply Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logility Supply Chain 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 Logility Supply. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logility Supply Chain has no effect on the direction of Arm Holdings i.e., Arm Holdings and Logility Supply go up and down completely randomly.

Pair Corralation between Arm Holdings and Logility Supply

Considering the 90-day investment horizon Arm Holdings is expected to generate 1.16 times less return on investment than Logility Supply. In addition to that, Arm Holdings is 1.18 times more volatile than Logility Supply Chain. It trades about 0.05 of its total potential returns per unit of risk. Logility Supply Chain is currently generating about 0.06 per unit of volatility. If you would invest  1,030  in Logility Supply Chain on October 24, 2024 and sell it today you would earn a total of  86.00  from holding Logility Supply Chain or generate 8.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Arm Holdings plc  vs.  Logility Supply Chain

Arm Holdings plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Arm Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Logility Supply Chain

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Arm Holdings and Logility Supply

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

The idea behind Arm Holdings plc and Logility Supply Chain 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.