Correlation Between Arbitrum and XT Token
Can any of the company-specific risk be diversified away by investing in both Arbitrum and XT Token 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 Arbitrum and XT Token into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arbitrum and XT Token, you can compare the effects of market volatilities on Arbitrum and XT Token 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 Arbitrum with a short position of XT Token. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbitrum and XT Token.
Diversification Opportunities for Arbitrum and XT Token
Poor diversification
The 3 months correlation between Arbitrum and XT Token is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and XT Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XT Token and Arbitrum 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 Arbitrum are associated (or correlated) with XT Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XT Token has no effect on the direction of Arbitrum i.e., Arbitrum and XT Token go up and down completely randomly.
Pair Corralation between Arbitrum and XT Token
Assuming the 90 days trading horizon Arbitrum is expected to generate 3.34 times more return on investment than XT Token. However, Arbitrum is 3.34 times more volatile than XT Token. It trades about 0.03 of its potential returns per unit of risk. XT Token is currently generating about 0.07 per unit of risk. If you would invest 40.00 in Arbitrum on April 14, 2025 and sell it today you would earn a total of 0.00 from holding Arbitrum or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arbitrum vs. XT Token
Performance |
| Timeline |
| Arbitrum |
| XT Token |
Arbitrum and XT Token Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arbitrum and XT Token
The main advantage of trading using opposite Arbitrum and XT Token positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbitrum position performs unexpectedly, XT Token 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 XT Token will offset losses from the drop in XT Token's long position.The idea behind Arbitrum and XT Token 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.Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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