Correlation Between Phala Network and Automata

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

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

Diversification Opportunities for Phala Network and Automata

0.74

Correlation Coefficient

Phala Network  Automata

Poor diversification

The 3 months correlation between Phala and Automata is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Phala Network and Automata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automata and Phala Network 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 Phala Network are associated (or correlated) with Automata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automata has no effect on the direction of Phala Network i.e., Phala Network and Automata go up and down completely randomly.

Pair Corralation between Phala Network and Automata

Assuming the 90 days trading horizon Phala Network is expected to generate 1.29 times more return on investment than Automata. However, Phala Network is 1.29 times more volatile than Automata. It trades about 0.04 of its potential returns per unit of risk. Automata is currently generating about 0.04 per unit of risk. If you would invest  22.00  in Phala Network on January 26, 2024 and sell it today you would lose (1.00) from holding Phala Network or give up 4.55% of portfolio value over 90 days.

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

Phala Network  vs.  Automata

Phala Network

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Phala Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

Automata

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 15 (%) 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.

Pair Trading with Phala Network and Automata

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

The idea behind Phala Network and Automata 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.