Correlation Between Toncoin and Chroma
Can any of the company-specific risk be diversified away by investing in both Toncoin and Chroma 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 Toncoin and Chroma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toncoin and Chroma, you can compare the effects of market volatilities on Toncoin and Chroma 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 Toncoin with a short position of Chroma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toncoin and Chroma.
Diversification Opportunities for Toncoin and Chroma
Very poor diversification
The 3 months correlation between Toncoin and Chroma is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Toncoin and Chroma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chroma and Toncoin 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 Toncoin are associated (or correlated) with Chroma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma has no effect on the direction of Toncoin i.e., Toncoin and Chroma go up and down completely randomly.
Pair Corralation between Toncoin and Chroma
Assuming the 90 days trading horizon Toncoin is expected to generate 2.72 times less return on investment than Chroma. But when comparing it to its historical volatility, Toncoin is 1.73 times less risky than Chroma. It trades about 0.11 of its potential returns per unit of risk. Chroma is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 18.00 in Chroma on August 24, 2024 and sell it today you would earn a total of 4.00 from holding Chroma or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toncoin vs. Chroma
Performance |
| Timeline |
| Toncoin |
| Chroma |
Toncoin and Chroma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toncoin and Chroma
The main advantage of trading using opposite Toncoin and Chroma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toncoin position performs unexpectedly, Chroma 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 Chroma will offset losses from the drop in Chroma's long position.The idea behind Toncoin and Chroma 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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