Correlation Between DIA and Arbitrum

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

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

Diversification Opportunities for DIA and Arbitrum

0.97

Correlation Coefficient

DIA  Arbitrum

Almost no diversification

The 3 months correlation between DIA and Arbitrum is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding DIA and Arbitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrum and DIA 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 DIA are associated (or correlated) with Arbitrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrum has no effect on the direction of DIA i.e., DIA and Arbitrum go up and down completely randomly.

Pair Corralation between DIA and Arbitrum

Assuming the 90 days trading horizon DIA is expected to generate 0.9 times more return on investment than Arbitrum. However, DIA is 1.12 times less risky than Arbitrum. It trades about -0.17 of its potential returns per unit of risk. Arbitrum is currently generating about -0.17 per unit of risk. If you would invest  70.00  in DIA on December 29, 2024 and sell it today you would lose (35.00) from holding DIA or give up 50.0% of portfolio value over 90 days.

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

DIA  vs.  Arbitrum

DIA

Risk-Adjusted Performance

Very Weak

Over the last 90 days DIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for DIA shareholders.

Arbitrum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arbitrum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental drivers remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Arbitrum shareholders.

Pair Trading with DIA and Arbitrum

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

The idea behind DIA and Arbitrum 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.