Correlation Between REGAL ASIAN and Arista Networks

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

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

Diversification Opportunities for REGAL ASIAN and Arista Networks

0.21

Correlation Coefficient

REGAL ASIAN  Arista Networks

Modest diversification

The 3 months correlation between REGAL and Arista is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding REGAL ASIAN INVESTMENTS and Arista Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arista Networks and REGAL ASIAN 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 REGAL ASIAN INVESTMENTS are associated (or correlated) with Arista Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arista Networks has no effect on the direction of REGAL ASIAN i.e., REGAL ASIAN and Arista Networks go up and down completely randomly.

Pair Corralation between REGAL ASIAN and Arista Networks

Assuming the 90 days trading horizon REGAL ASIAN is expected to generate 3.95 times less return on investment than Arista Networks. But when comparing it to its historical volatility, REGAL ASIAN INVESTMENTS is 1.31 times less risky than Arista Networks. It trades about 0.06 of its potential returns per unit of risk. Arista Networks is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  7,939  in Arista Networks on September 16, 2024 and sell it today you would earn a total of  2,251  from holding Arista Networks or generate 28.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

REGAL ASIAN INVESTMENTS  vs.  Arista Networks

REGAL ASIAN INVESTMENTS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REGAL ASIAN INVESTMENTS are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, REGAL ASIAN may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Arista Networks

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arista Networks are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Arista Networks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REGAL ASIAN and Arista Networks

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

The idea behind REGAL ASIAN INVESTMENTS and Arista Networks 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.