Correlation Between Numeraire and Ronin

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

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

Diversification Opportunities for Numeraire and Ronin

0.73

Correlation Coefficient

Numeraire  Ronin

Poor diversification

The 3 months correlation between Numeraire and Ronin is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Numeraire and Ronin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ronin 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 Ronin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ronin has no effect on the direction of Numeraire i.e., Numeraire and Ronin go up and down completely randomly.

Pair Corralation between Numeraire and Ronin

Assuming the 90 days trading horizon Numeraire is expected to generate 1.03 times more return on investment than Ronin. However, Numeraire is 1.03 times more volatile than Ronin. It trades about 0.17 of its potential returns per unit of risk. Ronin is currently generating about 0.14 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	Significant
Accuracy	100.0%
Values	Daily Returns

Numeraire  vs.  Ronin

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.

Ronin

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ronin are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ronin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Numeraire and Ronin

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

The idea behind Numeraire and Ronin 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.