Correlation Between Xai and Arbitrum

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

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

Diversification Opportunities for Xai and Arbitrum

0.96

Correlation Coefficient

Xai  Arbitrum

Almost no diversification

The 3 months correlation between Xai and Arbitrum is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Xai and Arbitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrum and Xai 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 Xai are associated (or correlated) with Arbitrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrum has no effect on the direction of Xai i.e., Xai and Arbitrum go up and down completely randomly.

Pair Corralation between Xai and Arbitrum

Assuming the 90 days trading horizon Xai is expected to generate 1.28 times more return on investment than Arbitrum. However, Xai is 1.28 times more volatile than Arbitrum. It trades about 0.19 of its potential returns per unit of risk. Arbitrum is currently generating about 0.21 per unit of risk. If you would invest  19.00  in Xai on September 3, 2024 and sell it today you would earn a total of  20.00  from holding Xai or generate 105.26% return on investment over 90 days.

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

Xai  vs.  Arbitrum

Xai

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xai are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Xai exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arbitrum

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Arbitrum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xai and Arbitrum

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

The idea behind Xai and Arbitrum 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.