Correlation Between Arm Holdings and Sphere Entertainment

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

Diversification Opportunities for Arm Holdings and Sphere Entertainment

0.54

Correlation Coefficient

Arm Holdings  Sphere Entertainment

Very weak diversification

The 3 months correlation between Arm and Sphere is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Arm Holdings i.e., Arm Holdings and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Arm Holdings and Sphere Entertainment

Considering the 90-day investment horizon Arm Holdings plc is expected to generate 1.19 times more return on investment than Sphere Entertainment. However, Arm Holdings is 1.19 times more volatile than Sphere Entertainment Co. It trades about -0.08 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.16 per unit of risk. If you would invest  13,968  in Arm Holdings plc on September 25, 2024 and sell it today you would lose (746.00) from holding Arm Holdings plc or give up 5.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Arm Holdings plc  vs.  Sphere Entertainment Co

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 unfluctuating 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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Arm Holdings and Sphere Entertainment

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

The idea behind Arm Holdings plc and Sphere Entertainment Co 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.