Correlation Between Arista Networks and Rigetti Computing

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

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

Diversification Opportunities for Arista Networks and Rigetti Computing

0.82

Correlation Coefficient

Arista Networks  Rigetti Computing

Very poor diversification

The 3 months correlation between Arista and Rigetti is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arista Networks and Rigetti Computing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rigetti Computing and Arista Networks 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 Arista Networks are associated (or correlated) with Rigetti Computing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rigetti Computing has no effect on the direction of Arista Networks i.e., Arista Networks and Rigetti Computing go up and down completely randomly.

Pair Corralation between Arista Networks and Rigetti Computing

Given the investment horizon of 90 days Arista Networks is expected to generate 18.87 times less return on investment than Rigetti Computing. But when comparing it to its historical volatility, Arista Networks is 6.35 times less risky than Rigetti Computing. It trades about 0.12 of its potential returns per unit of risk. Rigetti Computing is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Rigetti Computing on September 26, 2024 and sell it today you would earn a total of  1,018  from holding Rigetti Computing or generate 1305.13% return on investment over 90 days.

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

Arista Networks  vs.  Rigetti Computing

Arista Networks

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arista Networks are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Arista Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rigetti Computing

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Rigetti Computing are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Rigetti Computing demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arista Networks and Rigetti Computing

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

The idea behind Arista Networks and Rigetti Computing 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.