Correlation Between Arm Holdings and Benchmark Electronics

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

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

Diversification Opportunities for Arm Holdings and Benchmark Electronics

0.79

Correlation Coefficient

Arm Holdings  Benchmark Electronics

Poor diversification

The 3 months correlation between Arm and Benchmark is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Benchmark Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Electronics and Arm Holdings 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 Arm Holdings plc are associated (or correlated) with Benchmark Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Electronics has no effect on the direction of Arm Holdings i.e., Arm Holdings and Benchmark Electronics go up and down completely randomly.

Pair Corralation between Arm Holdings and Benchmark Electronics

Considering the 90-day investment horizon Arm Holdings plc is expected to generate 2.03 times more return on investment than Benchmark Electronics. However, Arm Holdings is 2.03 times more volatile than Benchmark Electronics. It trades about 0.09 of its potential returns per unit of risk. Benchmark Electronics is currently generating about 0.11 per unit of risk. If you would invest  12,327  in Arm Holdings plc on May 2, 2025 and sell it today you would earn a total of  1,811  from holding Arm Holdings plc or generate 14.69% return on investment over 90 days.

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

Arm Holdings plc  vs.  Benchmark Electronics

Arm Holdings plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Arm Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Benchmark Electronics may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Arm Holdings and Benchmark Electronics

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

The idea behind Arm Holdings plc and Benchmark Electronics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.