Correlation Between AirbnbInc and Applied Blockchain

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

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

Diversification Opportunities for AirbnbInc and Applied Blockchain

-0.41

Correlation Coefficient

AirbnbInc  Applied Blockchain

Very good diversification

The 3 months correlation between AirbnbInc and Applied is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding AirbnbInc and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain and AirbnbInc 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 AirbnbInc are associated (or correlated) with Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of AirbnbInc i.e., AirbnbInc and Applied Blockchain go up and down completely randomly.

Pair Corralation between AirbnbInc and Applied Blockchain

Given the investment horizon of 90 days AirbnbInc is expected to generate 3.73 times less return on investment than Applied Blockchain. But when comparing it to its historical volatility, AirbnbInc is 3.15 times less risky than Applied Blockchain. It trades about 0.04 of its potential returns per unit of risk. Applied Blockchain is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  282.00  in Applied Blockchain on January 27, 2024 and sell it today you would earn a total of  18.00  from holding Applied Blockchain or generate 6.38% return on investment over 90 days.

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

AirbnbInc  vs.  Applied Blockchain

AirbnbInc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AirbnbInc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AirbnbInc may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Applied Blockchain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Blockchain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential 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 the firm shareholders.

Pair Trading with AirbnbInc and Applied Blockchain

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

The idea behind AirbnbInc and Applied Blockchain 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.