Correlation Between Carbon Revolution and ARCA Biopharma

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

By analyzing existing cross correlation between Carbon Revolution Public and ARCA Biopharma, you can compare the effects of market volatilities on Carbon Revolution and ARCA Biopharma 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 Carbon Revolution with a short position of ARCA Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carbon Revolution and ARCA Biopharma.

Diversification Opportunities for Carbon Revolution and ARCA Biopharma

-0.36

Correlation Coefficient

Carbon Revolution  ARCA Biopharma

Very good diversification

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

Pair Corralation between Carbon Revolution and ARCA Biopharma

If you would invest  3.27  in Carbon Revolution Public on September 27, 2024 and sell it today you would earn a total of  3.73  from holding Carbon Revolution Public or generate 114.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Carbon Revolution Public  vs.  ARCA Biopharma

Carbon Revolution Public

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

ARCA Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARCA Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, ARCA Biopharma is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Carbon Revolution and ARCA Biopharma

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

The idea behind Carbon Revolution Public and ARCA Biopharma 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.