Correlation Between TRON and BIX
Can any of the company-specific risk be diversified away by investing in both TRON 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 TRON and BIX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRON and BIX, you can compare the effects of market volatilities on TRON 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 TRON with a short position of BIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and BIX.
Diversification Opportunities for TRON and BIX
Almost no diversification
The 3 months correlation between TRON and BIX is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding TRON and BIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIX and TRON 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 TRON 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 TRON i.e., TRON and BIX go up and down completely randomly.
Pair Corralation between TRON and BIX
Assuming the 90 days trading horizon TRON is expected to generate 1.39 times less return on investment than BIX. But when comparing it to its historical volatility, TRON is 3.12 times less risky than BIX. It trades about 0.13 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
TRON vs. BIX
Performance |
| Timeline |
| TRON |
| BIX |
TRON and BIX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRON and BIX
The main advantage of trading using opposite TRON and BIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON 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 TRON 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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