Correlation Between Algorand and Extended Market
Can any of the company-specific risk be diversified away by investing in both Algorand and Extended Market 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 Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and Extended Market Index, you can compare the effects of market volatilities on Algorand and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Extended Market.
Diversification Opportunities for Algorand and Extended Market
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Algorand and Extended is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Algorand i.e., Algorand and Extended Market go up and down completely randomly.
Pair Corralation between Algorand and Extended Market
Assuming the 90 days trading horizon Algorand is expected to generate 6.51 times more return on investment than Extended Market. However, Algorand is 6.51 times more volatile than Extended Market Index. It trades about 0.06 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.05 per unit of risk. If you would invest 22.00 in Algorand on November 1, 2024 and sell it today you would earn a total of 17.00 from holding Algorand or generate 77.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 58.44% |
| Values | Daily Returns |
Algorand vs. Extended Market Index
Performance |
| Timeline |
| Algorand |
| Extended Market Index |
Algorand and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and Extended Market
The main advantage of trading using opposite Algorand and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.The idea behind Algorand and Extended Market Index 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.| Extended Market vs. Tiaa Cref Inflation Link | Extended Market vs. Ab Bond Inflation | Extended Market vs. Guidepath Managed Futures | Extended Market vs. Guggenheim Managed Futures |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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