Correlation Between Arbitrum and RLC

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

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

Diversification Opportunities for Arbitrum and RLC

0.61

Correlation Coefficient

Arbitrum  RLC

Poor diversification

The 3 months correlation between Arbitrum and RLC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Arbitrum and RLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLC 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 RLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLC has no effect on the direction of Arbitrum i.e., Arbitrum and RLC go up and down completely randomly.

Pair Corralation between Arbitrum and RLC

Assuming the 90 days trading horizon Arbitrum is expected to generate 1.52 times more return on investment than RLC. However, Arbitrum is 1.52 times more volatile than RLC. It trades about 0.11 of its potential returns per unit of risk. RLC is currently generating about 0.01 per unit of risk. If you would invest  32.00  in Arbitrum on April 21, 2025 and sell it today you would earn a total of  14.00  from holding Arbitrum or generate 43.75% return on investment over 90 days.

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

Arbitrum  vs.  RLC

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.

RLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Arbitrum and RLC

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

The idea behind Arbitrum and RLC 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.