Correlation Between Castellum and ARB IOT

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

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

Diversification Opportunities for Castellum and ARB IOT

-0.04

Correlation Coefficient

Castellum  ARB IOT

Good diversification

The 3 months correlation between Castellum and ARB is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Castellum and ARB IOT Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARB IOT Group and Castellum 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 Castellum are associated (or correlated) with ARB IOT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARB IOT Group has no effect on the direction of Castellum i.e., Castellum and ARB IOT go up and down completely randomly.

Pair Corralation between Castellum and ARB IOT

Considering the 90-day investment horizon Castellum is expected to generate 4.42 times less return on investment than ARB IOT. But when comparing it to its historical volatility, Castellum is 3.05 times less risky than ARB IOT. It trades about 0.07 of its potential returns per unit of risk. ARB IOT Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  31.00  in ARB IOT Group on September 1, 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

Castellum  vs.  ARB IOT Group

Castellum

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Castellum are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Castellum displayed solid returns over the last few months and may actually be approaching a breakup point.

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 unsteady fundamental drivers, ARB IOT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castellum and ARB IOT

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

The idea behind Castellum and ARB IOT Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.