Correlation Between MicroAlgo and Powered Brands

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

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

Diversification Opportunities for MicroAlgo and Powered Brands

-0.52

Correlation Coefficient

MicroAlgo  Powered Brands

Excellent diversification

The 3 months correlation between MicroAlgo and Powered is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding MicroAlgo and Powered Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powered Brands and MicroAlgo 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 MicroAlgo are associated (or correlated) with Powered Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powered Brands has no effect on the direction of MicroAlgo i.e., MicroAlgo and Powered Brands go up and down completely randomly.

Pair Corralation between MicroAlgo and Powered Brands

Given the investment horizon of 90 days MicroAlgo is expected to generate 2.97 times less return on investment than Powered Brands. But when comparing it to its historical volatility, MicroAlgo is 1.29 times less risky than Powered Brands. It trades about 0.05 of its potential returns per unit of risk. Powered Brands is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Powered Brands on January 26, 2024 and sell it today you would lose (3.00) from holding Powered Brands or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	12.97%
Values	Daily Returns

MicroAlgo  vs.  Powered Brands

MicroAlgo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Powered Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powered Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Powered Brands is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with MicroAlgo and Powered Brands

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

The idea behind MicroAlgo and Powered Brands 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.