Correlation Between Arbitrum and SCRT

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

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

Diversification Opportunities for Arbitrum and SCRT

0.95

Correlation Coefficient

Arbitrum  SCRT

Almost no diversification

The 3 months correlation between Arbitrum and SCRT is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and SCRT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCRT and Arbitrum 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 Arbitrum are associated (or correlated) with SCRT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCRT has no effect on the direction of Arbitrum i.e., Arbitrum and SCRT go up and down completely randomly.

Pair Corralation between Arbitrum and SCRT

Assuming the 90 days trading horizon Arbitrum is expected to generate 2.17 times less return on investment than SCRT. But when comparing it to its historical volatility, Arbitrum is 2.01 times less risky than SCRT. It trades about 0.31 of its potential returns per unit of risk. SCRT is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  21.00  in SCRT on September 13, 2024 and sell it today you would earn a total of  35.00  from holding SCRT or generate 166.67% return on investment over 90 days.

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

Arbitrum  vs.  SCRT

Arbitrum

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Arbitrum exhibited solid returns over the last few months and may actually be approaching a breakup point.

SCRT

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SCRT are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SCRT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbitrum and SCRT

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

The idea behind Arbitrum and SCRT 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.