Correlation Between Arm Holdings and NetApp

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

Diversification Opportunities for Arm Holdings and NetApp

0.77

Correlation Coefficient

Arm Holdings  NetApp

Poor diversification

The 3 months correlation between Arm and NetApp is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Arm Holdings plc and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Arm Holdings i.e., Arm Holdings and NetApp go up and down completely randomly.

Pair Corralation between Arm Holdings and NetApp

Considering the 90-day investment horizon Arm Holdings plc is expected to generate 2.0 times more return on investment than NetApp. However, Arm Holdings is 2.0 times more volatile than NetApp Inc. It trades about 0.05 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.08 per unit of risk. If you would invest  13,345  in Arm Holdings plc on May 14, 2025 and sell it today you would earn a total of  760.00  from holding Arm Holdings plc or generate 5.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Arm Holdings plc  vs.  NetApp Inc

Arm Holdings plc

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Arm Holdings plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Arm Holdings may actually be approaching a critical reversion point that can send shares even higher in September 2025.

NetApp Inc

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in NetApp Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, NetApp may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Arm Holdings and NetApp

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

The idea behind Arm Holdings plc and NetApp Inc 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.