Correlation Between Numeraire and Audius

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

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

Diversification Opportunities for Numeraire and Audius

0.91

Correlation Coefficient

Numeraire  Audius

Almost no diversification

The 3 months correlation between Numeraire and Audius is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Numeraire and Audius in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Audius and Numeraire 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 Numeraire are associated (or correlated) with Audius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Audius has no effect on the direction of Numeraire i.e., Numeraire and Audius go up and down completely randomly.

Pair Corralation between Numeraire and Audius

Assuming the 90 days trading horizon Numeraire is expected to generate 0.97 times more return on investment than Audius. However, Numeraire is 1.03 times less risky than Audius. It trades about 0.17 of its potential returns per unit of risk. Audius is currently generating about 0.16 per unit of risk. If you would invest  1,357  in Numeraire on September 2, 2024 and sell it today you would earn a total of  863.00  from holding Numeraire or generate 63.6% return on investment over 90 days.

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

Numeraire  vs.  Audius

Numeraire

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Numeraire are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Numeraire exhibited solid returns over the last few months and may actually be approaching a breakup point.

Audius

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Audius are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Audius exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Numeraire and Audius

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

The idea behind Numeraire and Audius 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.