Correlation Between Avalanche and Near
Can any of the company-specific risk be diversified away by investing in both Avalanche and Near 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 Near into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and Near, you can compare the effects of market volatilities on Avalanche and Near 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 Near. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and Near.
Diversification Opportunities for Avalanche and Near
Very poor diversification
The 3 months correlation between Avalanche and Near is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Near in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near 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 Near. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near has no effect on the direction of Avalanche i.e., Avalanche and Near go up and down completely randomly.
Pair Corralation between Avalanche and Near
Assuming the 90 days trading horizon Avalanche is expected to generate 1.21 times more return on investment than Near. However, Avalanche is 1.21 times more volatile than Near. It trades about 0.37 of its potential returns per unit of risk. Near is currently generating about 0.35 per unit of risk. If you would invest 2,538 in Avalanche on August 26, 2024 and sell it today you would earn a total of 1,611 from holding Avalanche or generate 63.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avalanche vs. Near
Performance |
| Timeline |
| Avalanche |
| Near |
Avalanche and Near Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avalanche and Near
The main advantage of trading using opposite Avalanche and Near positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, Near 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 Near will offset losses from the drop in Near's long position.The idea behind Avalanche and Near 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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