Correlation Between Arm Holdings and Daqo New

Can any of the company-specific risk be diversified away by investing in both Arm Holdings and Daqo New 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 Daqo New 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 Daqo New Energy, you can compare the effects of market volatilities on Arm Holdings and Daqo New 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 Daqo New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arm Holdings and Daqo New.

Diversification Opportunities for Arm Holdings and Daqo New

0.71

Correlation Coefficient

Arm Holdings  Daqo New

Poor diversification

The 3 months correlation between Arm and Daqo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and Daqo New Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daqo New Energy 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 Daqo New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daqo New Energy has no effect on the direction of Arm Holdings i.e., Arm Holdings and Daqo New go up and down completely randomly.

Pair Corralation between Arm Holdings and Daqo New

Considering the 90-day investment horizon Arm Holdings is expected to generate 3.56 times less return on investment than Daqo New. But when comparing it to its historical volatility, Arm Holdings plc is 1.42 times less risky than Daqo New. It trades about 0.08 of its potential returns per unit of risk. Daqo New Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,277  in Daqo New Energy on May 4, 2025 and sell it today you would earn a total of  790.00  from holding Daqo New Energy or generate 61.86% 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.  Daqo New Energy

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.

Daqo New Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Daqo New Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Daqo New reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arm Holdings and Daqo New

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

The idea behind Arm Holdings plc and Daqo New Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.