Correlation Between Sandbox and Immutable

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

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

Diversification Opportunities for Sandbox and Immutable

0.6

Correlation Coefficient

Sandbox  Immutable

Poor diversification

The 3 months correlation between Sandbox and Immutable is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding The Sandbox and Immutable X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immutable X and Sandbox 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 The Sandbox are associated (or correlated) with Immutable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immutable X has no effect on the direction of Sandbox i.e., Sandbox and Immutable go up and down completely randomly.

Pair Corralation between Sandbox and Immutable

Assuming the 90 days trading horizon The Sandbox is expected to generate 1.42 times more return on investment than Immutable. However, Sandbox is 1.42 times more volatile than Immutable X. It trades about 0.23 of its potential returns per unit of risk. Immutable X is currently generating about 0.17 per unit of risk. If you would invest  24.00  in The Sandbox on September 2, 2024 and sell it today you would earn a total of  43.00  from holding The Sandbox or generate 179.17% return on investment over 90 days.

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

The Sandbox  vs.  Immutable X

Sandbox

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Sandbox are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Sandbox exhibited solid returns over the last few months and may actually be approaching a breakup point.

Immutable X

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Sandbox and Immutable

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

The idea behind The Sandbox and Immutable X 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.