Correlation Between Cardano and Avalanche
Can any of the company-specific risk be diversified away by investing in both Cardano and Avalanche 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 Cardano and Avalanche into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardano and Avalanche, you can compare the effects of market volatilities on Cardano and Avalanche 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 Cardano with a short position of Avalanche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardano and Avalanche.
Diversification Opportunities for Cardano and Avalanche
Very poor diversification
The 3 months correlation between Cardano and Avalanche is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Avalanche in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalanche and Cardano 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 Cardano are associated (or correlated) with Avalanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalanche has no effect on the direction of Cardano i.e., Cardano and Avalanche go up and down completely randomly.
Pair Corralation between Cardano and Avalanche
Assuming the 90 days trading horizon Cardano is expected to generate 1.51 times less return on investment than Avalanche. But when comparing it to its historical volatility, Cardano is 2.15 times less risky than Avalanche. It trades about 0.08 of its potential returns per unit of risk. Avalanche is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,341 in Avalanche on August 23, 2024 and sell it today you would earn a total of 2,012 from holding Avalanche or generate 150.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardano vs. Avalanche
Performance |
| Timeline |
| Cardano |
| Avalanche |
Cardano and Avalanche Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardano and Avalanche
The main advantage of trading using opposite Cardano and Avalanche positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano position performs unexpectedly, Avalanche 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 Avalanche will offset losses from the drop in Avalanche's long position.The idea behind Cardano and Avalanche 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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