Correlation Between Algorand and AST

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Can any of the company-specific risk be diversified away by investing in both Algorand and AST 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 AST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and AST, you can compare the effects of market volatilities on Algorand and AST 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 AST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and AST.

Diversification Opportunities for Algorand and AST

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Algorand and AST is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and AST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AST 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 AST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AST has no effect on the direction of Algorand i.e., Algorand and AST go up and down completely randomly.

Pair Corralation between Algorand and AST

Assuming the 90 days trading horizon Algorand is expected to under-perform the AST. But the crypto coin apears to be less risky and, when comparing its historical volatility, Algorand is 8.15 times less risky than AST. The crypto coin trades about -0.01 of its potential returns per unit of risk. The AST is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14.00  in AST on December 30, 2023 and sell it today you would earn a total of  4.00  from holding AST or generate 28.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Algorand  vs.  AST

 Performance 
       Timeline  
Algorand 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 8 (%) 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.
AST 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AST are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, AST exhibited solid returns over the last few months and may actually be approaching a breakup point.

Algorand and AST Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Algorand and AST

The main advantage of trading using opposite Algorand and AST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, AST 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 AST will offset losses from the drop in AST's long position.
The idea behind Algorand and AST 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.

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