The altitude of the arena is controlled by the south-west corner of the arena bin.  In other words, the arena will always stay in a perfectly flat, horizontal position and it's height will be determined by the terrain altitude at exactly the south-west corner.
 

It is probably wisest to make sure that the terrain altitude is consistently the same height all the way around the outer edge of the arena area.  Anything that dips below the arena wall, at the edge, will cause severe hall of mirrors effects.  You are free to set the inner area altitude as creatively as you can imagine.