Correlation Between API3 and Balancer

Can any of the company-specific risk be diversified away by investing in both API3 and Balancer 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 API3 and Balancer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between API3 and Balancer, you can compare the effects of market volatilities on API3 and Balancer 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 API3 with a short position of Balancer. Check out your portfolio center. Please also check ongoing floating volatility patterns of API3 and Balancer.

Diversification Opportunities for API3 and Balancer

0.54

Correlation Coefficient

API3  Balancer

Very weak diversification

The 3 months correlation between API3 and Balancer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding API3 and Balancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balancer and API3 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 API3 are associated (or correlated) with Balancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balancer has no effect on the direction of API3 i.e., API3 and Balancer go up and down completely randomly.

Pair Corralation between API3 and Balancer

Assuming the 90 days trading horizon API3 is expected to generate 2.13 times more return on investment than Balancer. However, API3 is 2.13 times more volatile than Balancer. It trades about 0.05 of its potential returns per unit of risk. Balancer is currently generating about -0.03 per unit of risk. If you would invest  152.00  in API3 on January 18, 2024 and sell it today you would earn a total of  76.00  from holding API3 or generate 50.0% return on investment over 90 days.

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

API3  vs.  Balancer

API3

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in API3 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, API3 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Balancer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Balancer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Balancer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with API3 and Balancer

The main advantage of trading using opposite API3 and Balancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if API3 position performs unexpectedly, Balancer 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 Balancer will offset losses from the drop in Balancer's long position.

The idea behind API3 and Balancer 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.