Correlation Between CSP and ARB IOT

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

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

Diversification Opportunities for CSP and ARB IOT

0.78

Correlation Coefficient

CSP  ARB IOT

Poor diversification

The 3 months correlation between CSP and ARB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CSP Inc 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 CSP 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 CSP Inc 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 CSP i.e., CSP and ARB IOT go up and down completely randomly.

Pair Corralation between CSP and ARB IOT

Given the investment horizon of 90 days CSP Inc is expected to generate 1.34 times more return on investment than ARB IOT. However, CSP is 1.34 times more volatile than ARB IOT Group. It trades about 0.16 of its potential returns per unit of risk. ARB IOT Group is currently generating about -0.57 per unit of risk. If you would invest  1,322  in CSP Inc on March 5, 2024 and sell it today you would earn a total of  157.00  from holding CSP Inc or generate 11.88% return on investment over 90 days.

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

CSP Inc  vs.  ARB IOT Group

CSP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

ARB IOT Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARB IOT Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CSP and ARB IOT

The main advantage of trading using opposite CSP and ARB IOT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSP 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 CSP Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.