Correlation Between Stratasys and Arlo Technologies

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

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

Diversification Opportunities for Stratasys and Arlo Technologies

0.68

Correlation Coefficient

Stratasys  Arlo Technologies

Poor diversification

The 3 months correlation between Stratasys and Arlo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys and Arlo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arlo Technologies and Stratasys 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 Stratasys are associated (or correlated) with Arlo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arlo Technologies has no effect on the direction of Stratasys i.e., Stratasys and Arlo Technologies go up and down completely randomly.

Pair Corralation between Stratasys and Arlo Technologies

Given the investment horizon of 90 days Stratasys is expected to under-perform the Arlo Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Stratasys is 1.3 times less risky than Arlo Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The Arlo Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Arlo Technologies on October 11, 2024 and sell it today you would earn a total of  800.00  from holding Arlo Technologies or generate 206.72% return on investment over 90 days.

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

Stratasys  vs.  Arlo Technologies

Stratasys

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

Arlo Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arlo Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Arlo Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Stratasys and Arlo Technologies

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

The idea behind Stratasys and Arlo Technologies 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.