Correlation Between KARRAT and Wormhole
Can any of the company-specific risk be diversified away by investing in both KARRAT and Wormhole 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 KARRAT and Wormhole into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KARRAT and Wormhole, you can compare the effects of market volatilities on KARRAT and Wormhole 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 KARRAT with a short position of Wormhole. Check out your portfolio center. Please also check ongoing floating volatility patterns of KARRAT and Wormhole.
Diversification Opportunities for KARRAT and Wormhole
Poor diversification
The 3 months correlation between KARRAT and Wormhole is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding KARRAT and Wormhole in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wormhole and KARRAT 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 KARRAT are associated (or correlated) with Wormhole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wormhole has no effect on the direction of KARRAT i.e., KARRAT and Wormhole go up and down completely randomly.
Pair Corralation between KARRAT and Wormhole
Assuming the 90 days trading horizon KARRAT is expected to generate 3.35 times less return on investment than Wormhole. But when comparing it to its historical volatility, KARRAT is 1.43 times less risky than Wormhole. It trades about 0.01 of its potential returns per unit of risk. Wormhole is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 24.00 in Wormhole on November 9, 2024 and sell it today you would lose (7.00) from holding Wormhole or give up 29.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KARRAT vs. Wormhole
Performance |
| Timeline |
| KARRAT |
| Wormhole |
KARRAT and Wormhole Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KARRAT and Wormhole
The main advantage of trading using opposite KARRAT and Wormhole positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KARRAT position performs unexpectedly, Wormhole 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 Wormhole will offset losses from the drop in Wormhole's long position.The idea behind KARRAT and Wormhole 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Commodity Directory Find actively traded commodities issued by global exchanges |