Correlation Between ARB IOT and Castellum

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

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

Diversification Opportunities for ARB IOT and Castellum

-0.05

Correlation Coefficient

ARB IOT  Castellum

Good diversification

The 3 months correlation between ARB and Castellum is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ARB IOT Group and Castellum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castellum and ARB IOT 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 ARB IOT Group are associated (or correlated) with Castellum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castellum has no effect on the direction of ARB IOT i.e., ARB IOT and Castellum go up and down completely randomly.

Pair Corralation between ARB IOT and Castellum

Given the investment horizon of 90 days ARB IOT Group is expected to generate 2.5 times more return on investment than Castellum. However, ARB IOT is 2.5 times more volatile than Castellum. It trades about 0.11 of its potential returns per unit of risk. Castellum is currently generating about 0.13 per unit of risk. If you would invest  31.00  in ARB IOT Group on September 3, 2024 and sell it today you would earn a total of  20.00  from holding ARB IOT Group or generate 64.52% return on investment over 90 days.

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

ARB IOT Group  vs.  Castellum

ARB IOT Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARB IOT Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

Castellum

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Castellum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Castellum displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARB IOT and Castellum

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

The idea behind ARB IOT Group and Castellum 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.