Correlation Between Avalanche and Fantom
Can any of the company-specific risk be diversified away by investing in both Avalanche and Fantom 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 Avalanche and Fantom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and Fantom, you can compare the effects of market volatilities on Avalanche and Fantom 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 Avalanche with a short position of Fantom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and Fantom.
Diversification Opportunities for Avalanche and Fantom
Poor diversification
The 3 months correlation between Avalanche and Fantom is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Fantom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantom and Avalanche 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 Avalanche are associated (or correlated) with Fantom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantom has no effect on the direction of Avalanche i.e., Avalanche and Fantom go up and down completely randomly.
Pair Corralation between Avalanche and Fantom
Assuming the 90 days trading horizon Avalanche is expected to generate 0.87 times more return on investment than Fantom. However, Avalanche is 1.15 times less risky than Fantom. It trades about 0.34 of its potential returns per unit of risk. Fantom is currently generating about 0.24 per unit of risk. If you would invest 2,686 in Avalanche on August 27, 2024 and sell it today you would earn a total of 1,462 from holding Avalanche or generate 54.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avalanche vs. Fantom
Performance |
| Timeline |
| Avalanche |
| Fantom |
Avalanche and Fantom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avalanche and Fantom
The main advantage of trading using opposite Avalanche and Fantom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, Fantom 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 Fantom will offset losses from the drop in Fantom's long position.The idea behind Avalanche and Fantom 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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