Correlation Between Algorand and ApeCoin

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

By analyzing existing cross correlation between Algorand and ApeCoin, you can compare the effects of market volatilities on Algorand and ApeCoin 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 ApeCoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and ApeCoin.

Diversification Opportunities for Algorand and ApeCoin

0.9

Correlation Coefficient

Algorand  ApeCoin

Almost no diversification

The 3 months correlation between Algorand and ApeCoin is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and ApeCoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ApeCoin 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 ApeCoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ApeCoin has no effect on the direction of Algorand i.e., Algorand and ApeCoin go up and down completely randomly.

Pair Corralation between Algorand and ApeCoin

Assuming the 90 days trading horizon Algorand is expected to generate 0.86 times more return on investment than ApeCoin. However, Algorand is 1.16 times less risky than ApeCoin. It trades about -0.02 of its potential returns per unit of risk. ApeCoin is currently generating about -0.04 per unit of risk. If you would invest  75.00  in Algorand on January 26, 2024 and sell it today you would lose (54.00) from holding Algorand or give up 72.0% of portfolio value over 90 days.

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

Algorand  vs.  ApeCoin

Algorand

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Algorand exhibited solid returns over the last few months and may actually be approaching a breakup point.

ApeCoin

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Algorand and ApeCoin

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

The idea behind Algorand and ApeCoin 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.