Correlation Between 126117AU4 and Arm Holdings

Can any of the company-specific risk be diversified away by investing in both 126117AU4 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 126117AU4 and Arm Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CNA FINL P and Arm Holdings plc, you can compare the effects of market volatilities on 126117AU4 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 126117AU4 with a short position of Arm Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of 126117AU4 and Arm Holdings.

Diversification Opportunities for 126117AU4 and Arm Holdings

0.29

Correlation Coefficient

126117AU4  Arm Holdings

Modest diversification

The 3 months correlation between 126117AU4 and Arm is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding CNA FINL P 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 126117AU4 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 CNA FINL P 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 126117AU4 i.e., 126117AU4 and Arm Holdings go up and down completely randomly.

Pair Corralation between 126117AU4 and Arm Holdings

Assuming the 90 days trading horizon CNA FINL P is expected to under-perform the Arm Holdings. But the bond apears to be less risky and, when comparing its historical volatility, CNA FINL P is 6.47 times less risky than Arm Holdings. The bond trades about -0.19 of its potential returns per unit of risk. The Arm Holdings plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13,840  in Arm Holdings plc on September 14, 2024 and sell it today you would earn a total of  1,593  from holding Arm Holdings plc or generate 11.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	73.44%
Values	Daily Returns

CNA FINL P  vs.  Arm Holdings plc

CNA FINL P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CNA FINL P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 126117AU4 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Arm Holdings plc

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Arm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 126117AU4 and Arm Holdings

The main advantage of trading using opposite 126117AU4 and Arm Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 126117AU4 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 CNA FINL P 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.