Correlation Between Cardano and Affinity World
Can any of the company-specific risk be diversified away by investing in both Cardano and Affinity World 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 Affinity World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardano and Affinity World Leaders, you can compare the effects of market volatilities on Cardano and Affinity World 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 Affinity World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardano and Affinity World.
Diversification Opportunities for Cardano and Affinity World
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cardano and Affinity is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Affinity World Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity World Leaders 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 Affinity World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity World Leaders has no effect on the direction of Cardano i.e., Cardano and Affinity World go up and down completely randomly.
Pair Corralation between Cardano and Affinity World
Assuming the 90 days trading horizon Cardano is expected to under-perform the Affinity World. In addition to that, Cardano is 5.37 times more volatile than Affinity World Leaders. It trades about -0.12 of its total potential returns per unit of risk. Affinity World Leaders is currently generating about 0.27 per unit of volatility. If you would invest 2,961 in Affinity World Leaders on November 2, 2024 and sell it today you would earn a total of 126.46 from holding Affinity World Leaders or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Cardano vs. Affinity World Leaders
Performance |
| Timeline |
| Cardano |
| Affinity World Leaders |
Cardano and Affinity World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardano and Affinity World
The main advantage of trading using opposite Cardano and Affinity World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano position performs unexpectedly, Affinity World 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 Affinity World will offset losses from the drop in Affinity World's long position.The idea behind Cardano and Affinity World Leaders 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.| Affinity World vs. American Century STOXX | Affinity World vs. PIMCO RAFI Dynamic | Affinity World vs. ProShares SP 500 |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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