Correlation Between ABBC and BORA

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

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

Diversification Opportunities for ABBC and BORA

-0.18

Correlation Coefficient

ABBC  BORA

Good diversification

The 3 months correlation between ABBC and BORA is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ABBC and BORA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORA and ABBC 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 ABBC are associated (or correlated) with BORA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORA has no effect on the direction of ABBC i.e., ABBC and BORA go up and down completely randomly.

Pair Corralation between ABBC and BORA

Assuming the 90 days trading horizon ABBC is expected to under-perform the BORA. But the crypto coin apears to be less risky and, when comparing its historical volatility, ABBC is 1.19 times less risky than BORA. The crypto coin trades about -0.23 of its potential returns per unit of risk. The BORA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14.00  in BORA on January 26, 2024 and sell it today you would earn a total of  2.00  from holding BORA or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ABBC  vs.  BORA

ABBC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABBC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for ABBC shareholders.

BORA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BORA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BORA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ABBC and BORA

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

The idea behind ABBC and BORA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.