Correlation Between Bounce and AST

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

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

Diversification Opportunities for Bounce and AST

-0.17

Correlation Coefficient

Bounce  AST

Good diversification

The 3 months correlation between Bounce and AST is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Bounce and AST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AST and Bounce 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 Bounce 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 Bounce i.e., Bounce and AST go up and down completely randomly.

Pair Corralation between Bounce and AST

Assuming the 90 days trading horizon Bounce is expected to generate 0.95 times more return on investment than AST. However, Bounce is 1.05 times less risky than AST. It trades about -0.06 of its potential returns per unit of risk. AST is currently generating about -0.1 per unit of risk. If you would invest  2,084  in Bounce on February 10, 2024 and sell it today you would lose (250.00) from holding Bounce or give up 12.0% of portfolio value over 90 days.

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

Bounce  vs.  AST

Bounce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bounce has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's forward indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for Bounce investors.

AST

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AST are ranked lower than 6 (%) 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.

Pair Trading with Bounce and AST

The main advantage of trading using opposite Bounce and AST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bounce 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 Bounce 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..