Correlation Between Arqit Quantum and SOS

Can any of the company-specific risk be diversified away by investing in both Arqit Quantum and SOS 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 Arqit Quantum and SOS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arqit Quantum and SOS Limited, you can compare the effects of market volatilities on Arqit Quantum and SOS 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 Arqit Quantum with a short position of SOS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arqit Quantum and SOS.

Diversification Opportunities for Arqit Quantum and SOS

-0.61

Correlation Coefficient

Arqit Quantum  SOS

Excellent diversification

The 3 months correlation between Arqit and SOS is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arqit Quantum and SOS Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOS Limited and Arqit Quantum 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 Arqit Quantum are associated (or correlated) with SOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOS Limited has no effect on the direction of Arqit Quantum i.e., Arqit Quantum and SOS go up and down completely randomly.

Pair Corralation between Arqit Quantum and SOS

Given the investment horizon of 90 days Arqit Quantum is expected to generate 0.99 times more return on investment than SOS. However, Arqit Quantum is 1.01 times less risky than SOS. It trades about 0.02 of its potential returns per unit of risk. SOS Limited is currently generating about 0.0 per unit of risk. If you would invest  9,000  in Arqit Quantum on September 19, 2024 and sell it today you would lose (5,359) from holding Arqit Quantum or give up 59.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Arqit Quantum  vs.  SOS Limited

Arqit Quantum

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arqit Quantum are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Arqit Quantum reported solid returns over the last few months and may actually be approaching a breakup point.

SOS Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOS Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, SOS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arqit Quantum and SOS

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

The idea behind Arqit Quantum and SOS Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.