Correlation Between SDN and BIT Computer

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

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

Diversification Opportunities for SDN and BIT Computer

0.2

Correlation Coefficient

SDN  BIT Computer

Modest diversification

The 3 months correlation between SDN and BIT is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding SDN Company and BIT Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIT Computer and SDN 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 SDN Company are associated (or correlated) with BIT Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIT Computer has no effect on the direction of SDN i.e., SDN and BIT Computer go up and down completely randomly.

Pair Corralation between SDN and BIT Computer

Assuming the 90 days trading horizon SDN Company is expected to under-perform the BIT Computer. But the stock apears to be less risky and, when comparing its historical volatility, SDN Company is 1.02 times less risky than BIT Computer. The stock trades about -0.18 of its potential returns per unit of risk. The BIT Computer Co is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  493,000  in BIT Computer Co on December 7, 2024 and sell it today you would lose (9,500) from holding BIT Computer Co or give up 1.93% of portfolio value over 90 days.

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

SDN Company  vs.  BIT Computer Co

SDN Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days SDN Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SDN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

BIT Computer

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BIT Computer Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BIT Computer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SDN and BIT Computer

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

The idea behind SDN Company and BIT Computer Co 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.