Correlation Between GAIA and Big Time

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

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

Diversification Opportunities for GAIA and Big Time

-0.36

Correlation Coefficient

GAIA  Big Time

Very good diversification

The 3 months correlation between GAIA and Big is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and Big Time in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Time and GAIA 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 GAIA are associated (or correlated) with Big Time. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Time has no effect on the direction of GAIA i.e., GAIA and Big Time go up and down completely randomly.

Pair Corralation between GAIA and Big Time

Assuming the 90 days trading horizon GAIA is expected to under-perform the Big Time. But the crypto coin apears to be less risky and, when comparing its historical volatility, GAIA is 1.13 times less risky than Big Time. The crypto coin trades about -0.03 of its potential returns per unit of risk. The Big Time is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6.57  in Big Time on September 1, 2024 and sell it today you would earn a total of  10.43  from holding Big Time or generate 158.75% return on investment over 90 days.

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

GAIA  vs.  Big Time

GAIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAIA 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 fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for GAIA shareholders.

Big Time

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with GAIA and Big Time

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

The idea behind GAIA and Big Time 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.