Correlation Between Tedea Technological and Arena Star

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

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

Diversification Opportunities for Tedea Technological and Arena Star

0.32

Correlation Coefficient

Tedea Technological  Arena Star

Weak diversification

The 3 months correlation between Tedea and Arena is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tedea Technological Developmen and Arena Star Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arena Star Group and Tedea Technological 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 Tedea Technological Development are associated (or correlated) with Arena Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arena Star Group has no effect on the direction of Tedea Technological i.e., Tedea Technological and Arena Star go up and down completely randomly.

Pair Corralation between Tedea Technological and Arena Star

Assuming the 90 days trading horizon Tedea Technological Development is expected to under-perform the Arena Star. In addition to that, Tedea Technological is 2.12 times more volatile than Arena Star Group. It trades about -0.09 of its total potential returns per unit of risk. Arena Star Group is currently generating about 0.06 per unit of volatility. If you would invest  20,730  in Arena Star Group on September 26, 2024 and sell it today you would earn a total of  2,390  from holding Arena Star Group or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.96%
Values	Daily Returns

Tedea Technological Developmen  vs.  Arena Star Group

Tedea Technological

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tedea Technological Development has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tedea Technological is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arena Star Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arena Star Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Arena Star may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tedea Technological and Arena Star

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

The idea behind Tedea Technological Development and Arena Star 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.