Correlation Between POT and XDN
Can any of the company-specific risk be diversified away by investing in both POT and XDN 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 POT and XDN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POT and XDN, you can compare the effects of market volatilities on POT and XDN 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 POT with a short position of XDN. Check out your portfolio center. Please also check ongoing floating volatility patterns of POT and XDN.
Diversification Opportunities for POT and XDN
Almost no diversification
The 3 months correlation between POT and XDN is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding POT and XDN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XDN and POT 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 POT are associated (or correlated) with XDN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XDN has no effect on the direction of POT i.e., POT and XDN go up and down completely randomly.
Pair Corralation between POT and XDN
Assuming the 90 days trading horizon POT is expected to under-perform the XDN. But the crypto coin apears to be less risky and, when comparing its historical volatility, POT is 1.76 times less risky than XDN. The crypto coin trades about -0.18 of its potential returns per unit of risk. The XDN is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 0.00 in XDN on November 28, 2024 and sell it today you would lose 0.00 from holding XDN or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
POT vs. XDN
Performance |
| Timeline |
| POT |
| XDN |
POT and XDN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with POT and XDN
The main advantage of trading using opposite POT and XDN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POT position performs unexpectedly, XDN 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 XDN will offset losses from the drop in XDN's long position.The idea behind POT and XDN 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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