Correlation Between Algorand and LAMB
Can any of the company-specific risk be diversified away by investing in both Algorand and LAMB 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 Algorand and LAMB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and LAMB, you can compare the effects of market volatilities on Algorand and LAMB 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 Algorand with a short position of LAMB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and LAMB.
Diversification Opportunities for Algorand and LAMB
Very poor diversification
The 3 months correlation between Algorand and LAMB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and LAMB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAMB and Algorand 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 Algorand are associated (or correlated) with LAMB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAMB has no effect on the direction of Algorand i.e., Algorand and LAMB go up and down completely randomly.
Pair Corralation between Algorand and LAMB
Assuming the 90 days trading horizon Algorand is expected to generate 0.71 times more return on investment than LAMB. However, Algorand is 1.42 times less risky than LAMB. It trades about -0.16 of its potential returns per unit of risk. LAMB is currently generating about -0.18 per unit of risk. If you would invest 27.00 in Algorand on January 26, 2024 and sell it today you would lose (6.00) from holding Algorand or give up 22.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algorand vs. LAMB
Performance |
| Timeline |
| Algorand |
| LAMB |
Algorand and LAMB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and LAMB
The main advantage of trading using opposite Algorand and LAMB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, LAMB 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 LAMB will offset losses from the drop in LAMB's long position.The idea behind Algorand and LAMB 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| AI Investment Finder Use AI to screen and filter profitable investment opportunities | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |