Correlation Between Cardano and Alto Ingredients

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

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

Diversification Opportunities for Cardano and Alto Ingredients

-0.44

Correlation Coefficient

Cardano  Alto Ingredients

Very good diversification

The 3 months correlation between Cardano and Alto is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Alto Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alto Ingredients and Cardano 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 Cardano are associated (or correlated) with Alto Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alto Ingredients has no effect on the direction of Cardano i.e., Cardano and Alto Ingredients go up and down completely randomly.

Pair Corralation between Cardano and Alto Ingredients

Assuming the 90 days trading horizon Cardano is expected to generate 1.32 times more return on investment than Alto Ingredients. However, Cardano is 1.32 times more volatile than Alto Ingredients. It trades about 0.1 of its potential returns per unit of risk. Alto Ingredients is currently generating about -0.01 per unit of risk. If you would invest  46.00  in Cardano on October 25, 2024 and sell it today you would earn a total of  52.00  from holding Cardano or generate 113.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.27%
Values	Daily Returns

Cardano  vs.  Alto Ingredients

Cardano

Risk-Adjusted Performance

20 of 100

Solid

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

Alto Ingredients

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alto Ingredients are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Alto Ingredients displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardano and Alto Ingredients

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

The idea behind Cardano and Alto Ingredients 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.