Correlation Between Ardiden and Good Vibrations

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

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

Diversification Opportunities for Ardiden and Good Vibrations

-0.82

Correlation Coefficient

Ardiden  Good Vibrations

Pay attention - limited upside

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

Pair Corralation between Ardiden and Good Vibrations

Assuming the 90 days horizon Ardiden Limited is expected to under-perform the Good Vibrations. In addition to that, Ardiden is 1.79 times more volatile than Good Vibrations Shoes. It trades about -0.3 of its total potential returns per unit of risk. Good Vibrations Shoes is currently generating about 0.23 per unit of volatility. If you would invest  0.22  in Good Vibrations Shoes on September 16, 2024 and sell it today you would earn a total of  0.12  from holding Good Vibrations Shoes or generate 54.55% return on investment over 90 days.

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

Ardiden Limited  vs.  Good Vibrations Shoes

Ardiden Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardiden Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Good Vibrations Shoes

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Good Vibrations Shoes are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal basic indicators, Good Vibrations demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ardiden and Good Vibrations

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

The idea behind Ardiden Limited and Good Vibrations Shoes 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.