Correlation Between IOC and Arweave

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

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

Diversification Opportunities for IOC and Arweave

0.39

Correlation Coefficient

IOC  Arweave

Weak diversification

The 3 months correlation between IOC and Arweave is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding IOC and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave and IOC 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 IOC are associated (or correlated) with Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of IOC i.e., IOC and Arweave go up and down completely randomly.

Pair Corralation between IOC and Arweave

Assuming the 90 days trading horizon IOC is expected to generate 0.31 times more return on investment than Arweave. However, IOC is 3.22 times less risky than Arweave. It trades about -0.06 of its potential returns per unit of risk. Arweave is currently generating about -0.19 per unit of risk. If you would invest  1.25  in IOC on December 2, 2024 and sell it today you would lose (0.13) from holding IOC or give up 10.4% of portfolio value over 90 days.

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

IOC  vs.  Arweave

IOC

Risk-Adjusted Performance

Very Weak

Over the last 90 days IOC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for IOC shareholders.

Arweave

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arweave 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 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 Arweave shareholders.

Pair Trading with IOC and Arweave

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

The idea behind IOC and Arweave 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.