Correlation Between Otonomo Technologies and Arqit Quantum

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

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

Diversification Opportunities for Otonomo Technologies and Arqit Quantum

-0.03

Correlation Coefficient

Otonomo Technologies  Arqit Quantum

Good diversification

The 3 months correlation between Otonomo and Arqit is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Otonomo Technologies and Arqit Quantum Warrants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arqit Quantum Warrants and Otonomo Technologies 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 Otonomo Technologies are associated (or correlated) with Arqit Quantum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arqit Quantum Warrants has no effect on the direction of Otonomo Technologies i.e., Otonomo Technologies and Arqit Quantum go up and down completely randomly.

Pair Corralation between Otonomo Technologies and Arqit Quantum

Assuming the 90 days horizon Otonomo Technologies is expected to generate 1.26 times less return on investment than Arqit Quantum. But when comparing it to its historical volatility, Otonomo Technologies is 1.42 times less risky than Arqit Quantum. It trades about 0.08 of its potential returns per unit of risk. Arqit Quantum Warrants is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Arqit Quantum Warrants on September 3, 2024 and sell it today you would lose (24.00) from holding Arqit Quantum Warrants or give up 39.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.41%
Values	Daily Returns

Otonomo Technologies  vs.  Arqit Quantum Warrants

Otonomo Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otonomo Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Otonomo Technologies is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arqit Quantum Warrants

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arqit Quantum Warrants are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Arqit Quantum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Otonomo Technologies and Arqit Quantum

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

The idea behind Otonomo Technologies and Arqit Quantum Warrants 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.