Correlation Between API3 and BORA

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

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

Diversification Opportunities for API3 and BORA

0.36

Correlation Coefficient

API3  BORA

Weak diversification

The 3 months correlation between API3 and BORA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding API3 and BORA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORA 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 BORA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORA has no effect on the direction of API3 i.e., API3 and BORA go up and down completely randomly.

Pair Corralation between API3 and BORA

Assuming the 90 days trading horizon API3 is expected to under-perform the BORA. But the crypto coin apears to be less risky and, when comparing its historical volatility, API3 is 1.15 times less risky than BORA. The crypto coin trades about -0.32 of its potential returns per unit of risk. The BORA is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  22.00  in BORA on January 26, 2024 and sell it today you would lose (6.00) from holding BORA or give up 27.27% of portfolio value over 90 days.

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

API3  vs.  BORA

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.

BORA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BORA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BORA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with API3 and BORA

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

The idea behind API3 and BORA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.