Correlation Between Wormhole and KARRAT

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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

0.71
  Correlation Coefficient

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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Wormhole  vs.  KARRAT

 Performance 
       Timeline  
Wormhole 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Wormhole has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Wormhole shareholders.
KARRAT 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days KARRAT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for KARRAT investors.

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.
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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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