Correlation Between GAIA and PAY

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

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

Diversification Opportunities for GAIA and PAY

0.11

Correlation Coefficient

GAIA  PAY

Average diversification

The 3 months correlation between GAIA and PAY is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and PAY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PAY 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 PAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PAY has no effect on the direction of GAIA i.e., GAIA and PAY go up and down completely randomly.

Pair Corralation between GAIA and PAY

Assuming the 90 days trading horizon GAIA is expected to under-perform the PAY. In addition to that, GAIA is 1.09 times more volatile than PAY. It trades about -0.04 of its total potential returns per unit of risk. PAY is currently generating about 0.11 per unit of volatility. If you would invest  0.59  in PAY on August 30, 2024 and sell it today you would earn a total of  0.27  from holding PAY or generate 45.11% return on investment over 90 days.

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

GAIA  vs.  PAY

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.

PAY

Risk-Adjusted Performance

8 of 100

Modest

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

Pair Trading with GAIA and PAY

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

The idea behind GAIA and PAY 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.