Correlation Between Applied Blockchain and MASSACHUSETTS

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

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

Diversification Opportunities for Applied Blockchain and MASSACHUSETTS

-0.26

Correlation Coefficient

Applied Blockchain  MASSACHUSETTS

Very good diversification

The 3 months correlation between Applied and MASSACHUSETTS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Applied Blockchain and MASSACHUSETTS INST TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSACHUSETTS INST and Applied Blockchain 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 Applied Blockchain are associated (or correlated) with MASSACHUSETTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSACHUSETTS INST has no effect on the direction of Applied Blockchain i.e., Applied Blockchain and MASSACHUSETTS go up and down completely randomly.

Pair Corralation between Applied Blockchain and MASSACHUSETTS

Given the investment horizon of 90 days Applied Blockchain is expected to generate 3.32 times less return on investment than MASSACHUSETTS. But when comparing it to its historical volatility, Applied Blockchain is 5.68 times less risky than MASSACHUSETTS. It trades about 0.07 of its potential returns per unit of risk. MASSACHUSETTS INST TECHNOLOGY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,595  in MASSACHUSETTS INST TECHNOLOGY on September 20, 2024 and sell it today you would lose (504.00) from holding MASSACHUSETTS INST TECHNOLOGY or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.94%
Values	Daily Returns

Applied Blockchain  vs.  MASSACHUSETTS INST TECHNOLOGY

Applied Blockchain

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

MASSACHUSETTS INST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Applied Blockchain and MASSACHUSETTS

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

The idea behind Applied Blockchain and MASSACHUSETTS INST TECHNOLOGY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.