Correlation Between GMX and Arbitrum

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

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

Diversification Opportunities for GMX and Arbitrum

0.47

Correlation Coefficient

GMX  Arbitrum

Very weak diversification

The 3 months correlation between GMX and Arbitrum is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding GMX and Arbitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrum and GMX 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 GMX are associated (or correlated) with Arbitrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrum has no effect on the direction of GMX i.e., GMX and Arbitrum go up and down completely randomly.

Pair Corralation between GMX and Arbitrum

Assuming the 90 days trading horizon GMX is expected to generate 1.22 times more return on investment than Arbitrum. However, GMX is 1.22 times more volatile than Arbitrum. It trades about 0.04 of its potential returns per unit of risk. Arbitrum is currently generating about 0.04 per unit of risk. If you would invest  2,069  in GMX on August 4, 2024 and sell it today you would earn a total of  92.00  from holding GMX or generate 4.45% return on investment over 90 days.

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

GMX  vs.  Arbitrum

GMX

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMX are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GMX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arbitrum

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Arbitrum may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with GMX and Arbitrum

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

The idea behind GMX and Arbitrum 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 Stocks Directory module to find actively traded stocks across global markets.