Correlation Between Stereo Vision and Arm Holdings

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

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

Diversification Opportunities for Stereo Vision and Arm Holdings

0.11

Correlation Coefficient

Stereo Vision  Arm Holdings

Average diversification

The 3 months correlation between Stereo and Arm is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stereo Vision Entertainment and Arm Holdings plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arm Holdings plc and Stereo Vision 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 Stereo Vision Entertainment are associated (or correlated) with Arm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arm Holdings plc has no effect on the direction of Stereo Vision i.e., Stereo Vision and Arm Holdings go up and down completely randomly.

Pair Corralation between Stereo Vision and Arm Holdings

Given the investment horizon of 90 days Stereo Vision Entertainment is expected to under-perform the Arm Holdings. In addition to that, Stereo Vision is 5.86 times more volatile than Arm Holdings plc. It trades about -0.22 of its total potential returns per unit of risk. Arm Holdings plc is currently generating about 0.05 per unit of volatility. If you would invest  13,795  in Arm Holdings plc on October 6, 2024 and sell it today you would earn a total of  313.00  from holding Arm Holdings plc or generate 2.27% return on investment over 90 days.

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

Stereo Vision Entertainment  vs.  Arm Holdings plc

Stereo Vision Entert

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stereo Vision Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Arm Holdings plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Arm Holdings is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stereo Vision and Arm Holdings

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

The idea behind Stereo Vision Entertainment and Arm Holdings plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.