Correlation Between API3 and Binance Coin

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

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

Diversification Opportunities for API3 and Binance Coin

0.05

Correlation Coefficient

API3  Binance Coin

Significant diversification

The 3 months correlation between API3 and Binance is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding API3 and Binance Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binance Coin 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 Binance Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binance Coin has no effect on the direction of API3 i.e., API3 and Binance Coin go up and down completely randomly.

Pair Corralation between API3 and Binance Coin

Assuming the 90 days trading horizon API3 is expected to under-perform the Binance Coin. In addition to that, API3 is 1.62 times more volatile than Binance Coin. It trades about -0.32 of its total potential returns per unit of risk. Binance Coin is currently generating about 0.09 per unit of volatility. If you would invest  57,401  in Binance Coin on January 26, 2024 and sell it today you would earn a total of  3,219  from holding Binance Coin or generate 5.61% return on investment over 90 days.

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

API3  vs.  Binance Coin

API3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days API3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, API3 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Binance Coin

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with API3 and Binance Coin

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

The idea behind API3 and Binance Coin 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.