Correlation Between Arm Holdings and Pinterest

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

Diversification Opportunities for Arm Holdings and Pinterest

0.36

Correlation Coefficient

Arm Holdings  Pinterest

Weak diversification

The 3 months correlation between Arm and Pinterest is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Pinterest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinterest 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 Pinterest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinterest has no effect on the direction of Arm Holdings i.e., Arm Holdings and Pinterest go up and down completely randomly.

Pair Corralation between Arm Holdings and Pinterest

Considering the 90-day investment horizon Arm Holdings plc is expected to under-perform the Pinterest. In addition to that, Arm Holdings is 1.25 times more volatile than Pinterest. It trades about -0.02 of its total potential returns per unit of risk. Pinterest is currently generating about 0.06 per unit of volatility. If you would invest  2,915  in Pinterest on December 28, 2024 and sell it today you would earn a total of  309.00  from holding Pinterest or generate 10.6% return on investment over 90 days.

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

Arm Holdings plc  vs.  Pinterest

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 recent stock price disarray, may contribute to short-term losses for the investors.

Pinterest

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pinterest are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Pinterest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arm Holdings and Pinterest

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

The idea behind Arm Holdings plc and Pinterest 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.