Correlation Between Automata and Algorand

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

Diversification Opportunities for Automata and Algorand

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Automata and Algorand is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Automata and Algorand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algorand and Automata 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 Automata are associated (or correlated) with Algorand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algorand has no effect on the direction of Automata i.e., Automata and Algorand go up and down completely randomly.

Pair Corralation between Automata and Algorand

Assuming the 90 days trading horizon Automata is expected to generate 1.32 times less return on investment than Algorand. But when comparing it to its historical volatility, Automata is 1.08 times less risky than Algorand. It trades about 0.15 of its potential returns per unit of risk. Algorand is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Algorand on December 30, 2023 and sell it today you would earn a total of  6.00  from holding Algorand or generate 28.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Automata  vs.  Algorand

 Performance 
       Timeline  
Automata 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Automata exhibited solid returns over the last few months and may actually be approaching a breakup point.
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.

Automata and Algorand Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Automata and Algorand

The main advantage of trading using opposite Automata and Algorand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automata position performs unexpectedly, Algorand 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 Algorand will offset losses from the drop in Algorand's long position.
The idea behind Automata and Algorand 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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