Correlation Between Sushi and Arkham

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

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

Diversification Opportunities for Sushi and Arkham

0.69

Correlation Coefficient

Sushi  Arkham

Poor diversification

The 3 months correlation between Sushi and Arkham is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sushi and Arkham in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arkham and Sushi 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 Sushi 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 Sushi i.e., Sushi and Arkham go up and down completely randomly.

Pair Corralation between Sushi and Arkham

Assuming the 90 days trading horizon Sushi is expected to generate 1.02 times less return on investment than Arkham. In addition to that, Sushi is 1.01 times more volatile than Arkham. It trades about 0.23 of its total potential returns per unit of risk. Arkham is currently generating about 0.24 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Sushi  vs.  Arkham

Sushi

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sushi are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Sushi 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 Sushi and Arkham

The main advantage of trading using opposite Sushi and Arkham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sushi 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 Sushi 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.