Correlation Between Algorand and BK Variable

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

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

Diversification Opportunities for Algorand and BK Variable

0.68

Correlation Coefficient

Algorand  BK Variable

Poor diversification

The 3 months correlation between Algorand and 0P0000120T is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and BK Variable Internacional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BK Variable Internacional and Algorand 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 Algorand are associated (or correlated) with BK Variable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BK Variable Internacional has no effect on the direction of Algorand i.e., Algorand and BK Variable go up and down completely randomly.

Pair Corralation between Algorand and BK Variable

Assuming the 90 days trading horizon Algorand is expected to generate 9.64 times more return on investment than BK Variable. However, Algorand is 9.64 times more volatile than BK Variable Internacional. It trades about 0.16 of its potential returns per unit of risk. BK Variable Internacional is currently generating about 0.29 per unit of risk. If you would invest  33.00  in Algorand on October 27, 2024 and sell it today you would earn a total of  7.00  from holding Algorand or generate 21.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Algorand  vs.  BK Variable Internacional

Algorand

Risk-Adjusted Performance

18 of 100

Solid

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

BK Variable Internacional

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BK Variable Internacional are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak basic indicators, BK Variable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Algorand and BK Variable

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

The idea behind Algorand and BK Variable Internacional 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.