Correlation Between Flow and Arkham

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

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

Diversification Opportunities for Flow and Arkham

0.59

Correlation Coefficient

Flow  Arkham

Very weak diversification

The 3 months correlation between Flow and Arkham is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Flow and Arkham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkham and Flow 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 Flow are associated (or correlated) with Arkham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arkham has no effect on the direction of Flow i.e., Flow and Arkham go up and down completely randomly.

Pair Corralation between Flow and Arkham

Assuming the 90 days trading horizon Flow is expected to generate 1.64 times less return on investment than Arkham. But when comparing it to its historical volatility, Flow is 1.55 times less risky than Arkham. It trades about 0.23 of its potential returns per unit of risk. Arkham is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  96.00  in Arkham on September 2, 2024 and sell it today you would earn a total of  145.00  from holding Arkham or generate 151.04% return on investment over 90 days.

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

Flow  vs.  Arkham

Flow

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flow are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Flow exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arkham

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arkham are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Arkham exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Flow and Arkham

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

The idea behind Flow and Arkham 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.