Correlation Between Ondo and BIX
Can any of the company-specific risk be diversified away by investing in both Ondo and BIX 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 Ondo and BIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ondo and BIX, you can compare the effects of market volatilities on Ondo and BIX 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 Ondo with a short position of BIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ondo and BIX.
Diversification Opportunities for Ondo and BIX
Very poor diversification
The 3 months correlation between Ondo and BIX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Ondo and BIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIX and Ondo 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 Ondo are associated (or correlated) with BIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIX has no effect on the direction of Ondo i.e., Ondo and BIX go up and down completely randomly.
Pair Corralation between Ondo and BIX
Assuming the 90 days trading horizon Ondo is expected to generate 22.0 times less return on investment than BIX. But when comparing it to its historical volatility, Ondo is 2.23 times less risky than BIX. It trades about 0.01 of its potential returns per unit of risk. BIX is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.93 in BIX on August 27, 2024 and sell it today you would earn a total of 0.14 from holding BIX or generate 14.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 52.94% |
| Values | Daily Returns |
Ondo vs. BIX
Performance |
| Timeline |
| Ondo |
| BIX |
Ondo and BIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ondo and BIX
The main advantage of trading using opposite Ondo and BIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ondo position performs unexpectedly, BIX 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 BIX will offset losses from the drop in BIX's long position.The idea behind Ondo and BIX 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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