Correlation Between Aptos and KARRAT
Can any of the company-specific risk be diversified away by investing in both Aptos and KARRAT 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 Aptos and KARRAT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aptos and KARRAT, you can compare the effects of market volatilities on Aptos and KARRAT 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 Aptos with a short position of KARRAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptos and KARRAT.
Diversification Opportunities for Aptos and KARRAT
Poor diversification
The 3 months correlation between Aptos and KARRAT is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aptos and KARRAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KARRAT and Aptos 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 Aptos are associated (or correlated) with KARRAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KARRAT has no effect on the direction of Aptos i.e., Aptos and KARRAT go up and down completely randomly.
Pair Corralation between Aptos and KARRAT
Assuming the 90 days trading horizon Aptos is expected to generate 0.57 times more return on investment than KARRAT. However, Aptos is 1.75 times less risky than KARRAT. It trades about 0.08 of its potential returns per unit of risk. KARRAT is currently generating about 0.01 per unit of risk. If you would invest 478.00 in Aptos on August 30, 2024 and sell it today you would earn a total of 794.00 from holding Aptos or generate 166.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 45.97% |
| Values | Daily Returns |
Aptos vs. KARRAT
Performance |
| Timeline |
| Aptos |
| KARRAT |
Aptos and KARRAT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aptos and KARRAT
The main advantage of trading using opposite Aptos and KARRAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aptos position performs unexpectedly, KARRAT 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 KARRAT will offset losses from the drop in KARRAT's long position.The idea behind Aptos and KARRAT 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |