Correlation Between Ondo and Cronos
Can any of the company-specific risk be diversified away by investing in both Ondo and Cronos 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 Cronos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ondo and Cronos, you can compare the effects of market volatilities on Ondo and Cronos 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 Cronos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ondo and Cronos.
Diversification Opportunities for Ondo and Cronos
Very poor diversification
The 3 months correlation between Ondo and Cronos is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ondo and Cronos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos has no effect on the direction of Ondo i.e., Ondo and Cronos go up and down completely randomly.
Pair Corralation between Ondo and Cronos
Assuming the 90 days trading horizon Ondo is expected to generate 3.4 times less return on investment than Cronos. But when comparing it to its historical volatility, Ondo is 2.56 times less risky than Cronos. It trades about 0.22 of its potential returns per unit of risk. Cronos is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 7.57 in Cronos on August 23, 2024 and sell it today you would earn a total of 11.43 from holding Cronos or generate 150.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ondo vs. Cronos
Performance |
| Timeline |
| Ondo |
| Cronos |
Ondo and Cronos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ondo and Cronos
The main advantage of trading using opposite Ondo and Cronos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ondo position performs unexpectedly, Cronos 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 Cronos will offset losses from the drop in Cronos' long position.The idea behind Ondo and Cronos 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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