Correlation Between Algorand and Hawaii Municipal

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

By analyzing existing cross correlation between Algorand and Hawaii Municipal Bond, you can compare the effects of market volatilities on Algorand and Hawaii Municipal 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 Hawaii Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Hawaii Municipal.

Diversification Opportunities for Algorand and Hawaii Municipal

0.42

Correlation Coefficient

Algorand  Hawaii Municipal

Very weak diversification

The 3 months correlation between Algorand and Hawaii is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Hawaii Municipal Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawaii Municipal Bond 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 Hawaii Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawaii Municipal Bond has no effect on the direction of Algorand i.e., Algorand and Hawaii Municipal go up and down completely randomly.

Pair Corralation between Algorand and Hawaii Municipal

Assuming the 90 days trading horizon Algorand is expected to generate 49.01 times more return on investment than Hawaii Municipal. However, Algorand is 49.01 times more volatile than Hawaii Municipal Bond. It trades about 0.09 of its potential returns per unit of risk. Hawaii Municipal Bond is currently generating about 0.04 per unit of risk. If you would invest  19.00  in Algorand on October 9, 2024 and sell it today you would earn a total of  19.00  from holding Algorand or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.07%
Values	Daily Returns

Algorand  vs.  Hawaii Municipal Bond

Algorand

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 19 (%) 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.

Hawaii Municipal Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawaii Municipal Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hawaii Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Algorand and Hawaii Municipal

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

The idea behind Algorand and Hawaii Municipal Bond 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.