Correlation Between Algorand and Sol Gel
Can any of the company-specific risk be diversified away by investing in both Algorand and Sol Gel 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 Algorand and Sol Gel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and Sol Gel Technologies, you can compare the effects of market volatilities on Algorand and Sol Gel 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 Algorand with a short position of Sol Gel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Sol Gel.
Diversification Opportunities for Algorand and Sol Gel
Modest diversification
The 3 months correlation between Algorand and Sol is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Sol Gel Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sol Gel Technologies and Algorand 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 Algorand are associated (or correlated) with Sol Gel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sol Gel Technologies has no effect on the direction of Algorand i.e., Algorand and Sol Gel go up and down completely randomly.
Pair Corralation between Algorand and Sol Gel
Assuming the 90 days trading horizon Algorand is expected to generate 1.58 times less return on investment than Sol Gel. But when comparing it to its historical volatility, Algorand is 3.93 times less risky than Sol Gel. It trades about 0.24 of its potential returns per unit of risk. Sol Gel Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 62.00 in Sol Gel Technologies on October 29, 2024 and sell it today you would earn a total of 27.00 from holding Sol Gel Technologies or generate 43.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.75% |
| Values | Daily Returns |
Algorand vs. Sol Gel Technologies
Performance |
| Timeline |
| Algorand |
| Sol Gel Technologies |
Algorand and Sol Gel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and Sol Gel
The main advantage of trading using opposite Algorand and Sol Gel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, Sol Gel 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 Sol Gel will offset losses from the drop in Sol Gel's long position.The idea behind Algorand and Sol Gel Technologies 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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