Correlation Between Wormhole and KARRAT
Can any of the company-specific risk be diversified away by investing in both Wormhole and KARRAT 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 Wormhole and KARRAT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wormhole and KARRAT, you can compare the effects of market volatilities on Wormhole and KARRAT 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 Wormhole with a short position of KARRAT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wormhole and KARRAT.
Diversification Opportunities for Wormhole and KARRAT
Poor diversification
The 3 months correlation between Wormhole and KARRAT is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Wormhole and KARRAT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KARRAT and Wormhole 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 Wormhole are associated (or correlated) with KARRAT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KARRAT has no effect on the direction of Wormhole i.e., Wormhole and KARRAT go up and down completely randomly.
Pair Corralation between Wormhole and KARRAT
Given the investment horizon of 90 days Wormhole is expected to generate 0.7 times more return on investment than KARRAT. However, Wormhole is 1.43 times less risky than KARRAT. It trades about -0.04 of its potential returns per unit of risk. KARRAT is currently generating about -0.4 per unit of risk. If you would invest 27.00 in Wormhole on November 7, 2024 and sell it today you would lose (2.00) from holding Wormhole or give up 7.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wormhole vs. KARRAT
Performance |
| Timeline |
| Wormhole |
| KARRAT |
Wormhole and KARRAT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wormhole and KARRAT
The main advantage of trading using opposite Wormhole and KARRAT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wormhole position performs unexpectedly, KARRAT 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 KARRAT will offset losses from the drop in KARRAT's long position.The idea behind Wormhole and KARRAT 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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