Correlation Between Polkadot and Amana Growth

Can any of the company-specific risk be diversified away by investing in both Polkadot and Amana Growth 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 Polkadot and Amana Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polkadot and Amana Growth Fund, you can compare the effects of market volatilities on Polkadot and Amana Growth 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 Polkadot with a short position of Amana Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and Amana Growth.

Diversification Opportunities for Polkadot and Amana Growth

0.83

Correlation Coefficient

Polkadot  Amana Growth

Very poor diversification

The 3 months correlation between Polkadot and Amana is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Amana Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Growth and Polkadot 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 Polkadot are associated (or correlated) with Amana Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Growth has no effect on the direction of Polkadot i.e., Polkadot and Amana Growth go up and down completely randomly.

Pair Corralation between Polkadot and Amana Growth

Assuming the 90 days trading horizon Polkadot is expected to generate 4.78 times more return on investment than Amana Growth. However, Polkadot is 4.78 times more volatile than Amana Growth Fund. It trades about 0.04 of its potential returns per unit of risk. Amana Growth Fund is currently generating about 0.11 per unit of risk. If you would invest  466.00  in Polkadot on January 31, 2024 and sell it today you would earn a total of  162.00  from holding Polkadot or generate 34.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.48%
Values	Daily Returns

Polkadot  vs.  Amana Growth Fund

Polkadot

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Polkadot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Amana Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Amana Growth Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Amana Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Polkadot and Amana Growth

The main advantage of trading using opposite Polkadot and Amana Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Amana Growth 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 Amana Growth will offset losses from the drop in Amana Growth's long position.

The idea behind Polkadot and Amana Growth Fund 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.