Correlation Between Algorand and Chain Bridge

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

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

Diversification Opportunities for Algorand and Chain Bridge

0.34

Correlation Coefficient

Algorand  Chain Bridge

Weak diversification

The 3 months correlation between Algorand and Chain is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Chain Bridge I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chain Bridge I 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 Chain Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chain Bridge I has no effect on the direction of Algorand i.e., Algorand and Chain Bridge go up and down completely randomly.

Pair Corralation between Algorand and Chain Bridge

Assuming the 90 days trading horizon Algorand is expected to generate 13.74 times more return on investment than Chain Bridge. However, Algorand is 13.74 times more volatile than Chain Bridge I. It trades about 0.25 of its potential returns per unit of risk. Chain Bridge I is currently generating about -0.23 per unit of risk. If you would invest  12.00  in Algorand on October 26, 2024 and sell it today you would earn a total of  29.00  from holding Algorand or generate 241.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	30.16%
Values	Daily Returns

Algorand  vs.  Chain Bridge I

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.

Chain Bridge I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chain Bridge I has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Algorand and Chain Bridge

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

The idea behind Algorand and Chain Bridge I 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.