Correlation Between Algorand and ESACW Old

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

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

Diversification Opportunities for Algorand and ESACW Old

0.07

Correlation Coefficient

Algorand  ESACW Old

Significant diversification

The 3 months correlation between Algorand and ESACW is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and ESACW Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESACW Old 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 ESACW Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESACW Old has no effect on the direction of Algorand i.e., Algorand and ESACW Old go up and down completely randomly.

Pair Corralation between Algorand and ESACW Old

Assuming the 90 days trading horizon Algorand is expected to generate 10.99 times less return on investment than ESACW Old. But when comparing it to its historical volatility, Algorand is 4.18 times less risky than ESACW Old. It trades about 0.05 of its potential returns per unit of risk. ESACW Old is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5.50  in ESACW Old on October 10, 2024 and sell it today you would earn a total of  5.50  from holding ESACW Old or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	19.87%
Values	Daily Returns

Algorand  vs.  ESACW Old

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.

ESACW Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESACW Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, ESACW Old is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Algorand and ESACW Old

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

The idea behind Algorand and ESACW Old 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.