Correlation Between Algorand and SP Funds

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

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

Diversification Opportunities for Algorand and SP Funds

-0.73

Correlation Coefficient

Algorand  SP Funds

Pay attention - limited upside

The 3 months correlation between Algorand and SPSK is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and SP Funds Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds Dow 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 SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds Dow has no effect on the direction of Algorand i.e., Algorand and SP Funds go up and down completely randomly.

Pair Corralation between Algorand and SP Funds

Assuming the 90 days trading horizon Algorand is expected to under-perform the SP Funds. In addition to that, Algorand is 17.82 times more volatile than SP Funds Dow. It trades about -0.14 of its total potential returns per unit of risk. SP Funds Dow is currently generating about 0.1 per unit of volatility. If you would invest  1,767  in SP Funds Dow on December 21, 2024 and sell it today you would earn a total of  38.00  from holding SP Funds Dow or generate 2.15% return on investment over 90 days.

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

Algorand  vs.  SP Funds Dow

Algorand

Risk-Adjusted Performance

Very Weak

Over the last 90 days Algorand has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Algorand shareholders.

SP Funds Dow

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SP Funds Dow are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, SP Funds is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Algorand and SP Funds

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

The idea behind Algorand and SP Funds Dow 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.