Correlation Between Arbitrum and Biconomy

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

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

Diversification Opportunities for Arbitrum and Biconomy

0.86

Correlation Coefficient

Arbitrum  Biconomy

Very poor diversification

The 3 months correlation between Arbitrum and Biconomy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and Biconomy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biconomy and Arbitrum 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 Arbitrum are associated (or correlated) with Biconomy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biconomy has no effect on the direction of Arbitrum i.e., Arbitrum and Biconomy go up and down completely randomly.

Pair Corralation between Arbitrum and Biconomy

Assuming the 90 days trading horizon Arbitrum is expected to generate 1.33 times less return on investment than Biconomy. But when comparing it to its historical volatility, Arbitrum is 1.24 times less risky than Biconomy. It trades about 0.33 of its potential returns per unit of risk. Biconomy is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Biconomy on August 28, 2024 and sell it today you would earn a total of  15.00  from holding Biconomy or generate 78.95% return on investment over 90 days.

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

Arbitrum  vs.  Biconomy

Arbitrum

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 13 (%) 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.

Biconomy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biconomy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Biconomy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbitrum and Biconomy

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

The idea behind Arbitrum and Biconomy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.