Correlation Between Thorchain and Fantom

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

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

Diversification Opportunities for Thorchain and Fantom

0.79

Correlation Coefficient

Thorchain  Fantom

Poor diversification

The 3 months correlation between Thorchain and Fantom is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Thorchain and Fantom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fantom and Thorchain 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 Thorchain are associated (or correlated) with Fantom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fantom has no effect on the direction of Thorchain i.e., Thorchain and Fantom go up and down completely randomly.

Pair Corralation between Thorchain and Fantom

Assuming the 90 days trading horizon Thorchain is expected to generate 2.0 times less return on investment than Fantom. But when comparing it to its historical volatility, Thorchain is 1.3 times less risky than Fantom. It trades about 0.17 of its potential returns per unit of risk. Fantom is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Fantom on September 3, 2024 and sell it today you would earn a total of  86.00  from holding Fantom or generate 215.0% return on investment over 90 days.

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

Thorchain  vs.  Fantom

Thorchain

Risk-Adjusted Performance

13 of 100

Good

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

Fantom

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fantom are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Fantom exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thorchain and Fantom

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

The idea behind Thorchain and Fantom 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.