Correlation Between DENT and ARPA

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

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

Diversification Opportunities for DENT and ARPA

0.96

Correlation Coefficient

DENT  ARPA

Almost no diversification

The 3 months correlation between DENT and ARPA is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding DENT and ARPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA and DENT 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 DENT are associated (or correlated) with ARPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARPA has no effect on the direction of DENT i.e., DENT and ARPA go up and down completely randomly.

Pair Corralation between DENT and ARPA

Assuming the 90 days trading horizon DENT is expected to generate 1.23 times more return on investment than ARPA. However, DENT is 1.23 times more volatile than ARPA. It trades about 0.0 of its potential returns per unit of risk. ARPA is currently generating about -0.02 per unit of risk. If you would invest  0.07  in DENT on May 5, 2025 and sell it today you would lose (0.01) from holding DENT or give up 9.56% of portfolio value over 90 days.

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

DENT  vs.  ARPA

DENT

Risk-Adjusted Performance

Weak

Over the last 90 days DENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, DENT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ARPA

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARPA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, ARPA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DENT and ARPA

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

The idea behind DENT and ARPA 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.