Correlation Between Bittensor and Gas

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

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

Diversification Opportunities for Bittensor and Gas

0.71

Correlation Coefficient

Bittensor  Gas

Poor diversification

The 3 months correlation between Bittensor and Gas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bittensor and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gas and Bittensor 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 Bittensor are associated (or correlated) with Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gas has no effect on the direction of Bittensor i.e., Bittensor and Gas go up and down completely randomly.

Pair Corralation between Bittensor and Gas

Assuming the 90 days trading horizon Bittensor is expected to generate 1.38 times more return on investment than Gas. However, Bittensor is 1.38 times more volatile than Gas. It trades about 0.26 of its potential returns per unit of risk. Gas is currently generating about 0.24 per unit of risk. If you would invest  24,765  in Bittensor on September 1, 2024 and sell it today you would earn a total of  43,110  from holding Bittensor or generate 174.08% return on investment over 90 days.

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

Bittensor  vs.  Gas

Bittensor

Risk-Adjusted Performance

20 of 100

Solid

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

Gas

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Bittensor and Gas

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

The idea behind Bittensor and Gas 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.