Correlation Between Arbitrum and KAITO

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

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

Diversification Opportunities for Arbitrum and KAITO

0.6

Correlation Coefficient

Arbitrum  KAITO

Poor diversification

The 3 months correlation between Arbitrum and KAITO is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and KAITO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KAITO 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 KAITO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KAITO has no effect on the direction of Arbitrum i.e., Arbitrum and KAITO go up and down completely randomly.

Pair Corralation between Arbitrum and KAITO

Assuming the 90 days trading horizon Arbitrum is expected to generate 1.99 times less return on investment than KAITO. But when comparing it to its historical volatility, Arbitrum is 1.53 times less risky than KAITO. It trades about 0.11 of its potential returns per unit of risk. KAITO is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  85.00  in KAITO on April 20, 2025 and sell it today you would earn a total of  78.00  from holding KAITO or generate 91.76% return on investment over 90 days.

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

Arbitrum  vs.  KAITO

Arbitrum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Arbitrum exhibited solid returns over the last few months and may actually be approaching a breakup point.

KAITO

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KAITO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, KAITO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arbitrum and KAITO

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

The idea behind Arbitrum and KAITO 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.