Correlation Between Arm Holdings and UNITED

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

Diversification Opportunities for Arm Holdings and UNITED

-0.35

Correlation Coefficient

Arm Holdings  UNITED

Very good diversification

The 3 months correlation between Arm and UNITED is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and UNITED PARCEL SERVICE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED PARCEL SERVICE 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 UNITED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED PARCEL SERVICE has no effect on the direction of Arm Holdings i.e., Arm Holdings and UNITED go up and down completely randomly.

Pair Corralation between Arm Holdings and UNITED

Considering the 90-day investment horizon Arm Holdings plc is expected to generate 8.38 times more return on investment than UNITED. However, Arm Holdings is 8.38 times more volatile than UNITED PARCEL SERVICE. It trades about 0.03 of its potential returns per unit of risk. UNITED PARCEL SERVICE is currently generating about 0.03 per unit of risk. If you would invest  13,429  in Arm Holdings plc on November 28, 2024 and sell it today you would earn a total of  471.00  from holding Arm Holdings plc or generate 3.51% 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.  UNITED PARCEL SERVICE

Arm Holdings plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Arm Holdings may actually be approaching a critical reversion point that can send shares even higher in March 2025.

UNITED PARCEL SERVICE

Risk-Adjusted Performance

Weak

Over the last 90 days UNITED PARCEL SERVICE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITED 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 UNITED

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

The idea behind Arm Holdings plc and UNITED PARCEL SERVICE 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.