Correlation Between Snap and Anchor Risk
Can any of the company-specific risk be diversified away by investing in both Snap and Anchor Risk 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 Snap and Anchor Risk into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Anchor Risk Managed, you can compare the effects of market volatilities on Snap and Anchor Risk 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 Snap with a short position of Anchor Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Anchor Risk.
Diversification Opportunities for Snap and Anchor Risk
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and Anchor is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Anchor Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anchor Risk Managed and Snap 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 Snap Inc are associated (or correlated) with Anchor Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anchor Risk Managed has no effect on the direction of Snap i.e., Snap and Anchor Risk go up and down completely randomly.
Pair Corralation between Snap and Anchor Risk
Given the investment horizon of 90 days Snap Inc is expected to generate 11.36 times more return on investment than Anchor Risk. However, Snap is 11.36 times more volatile than Anchor Risk Managed. It trades about 0.1 of its potential returns per unit of risk. Anchor Risk Managed is currently generating about 0.15 per unit of risk. If you would invest 1,071 in Snap Inc on August 29, 2024 and sell it today you would earn a total of 90.00 from holding Snap Inc or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Anchor Risk Managed
Performance |
| Timeline |
| Snap Inc |
| Anchor Risk Managed |
Snap and Anchor Risk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Anchor Risk
The main advantage of trading using opposite Snap and Anchor Risk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, Anchor Risk 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 Anchor Risk will offset losses from the drop in Anchor Risk's long position.The idea behind Snap Inc and Anchor Risk Managed 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.| Anchor Risk vs. Jpmorgan Hedged Equity | Anchor Risk vs. Jpmorgan Hedged Equity | Anchor Risk vs. Gateway Fund Class | Anchor Risk vs. Gateway Fund Class |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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