Correlation Between Algorand and Whitbread PLC

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

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

Diversification Opportunities for Algorand and Whitbread PLC

-0.76

Correlation Coefficient

Algorand  Whitbread PLC

Pay attention - limited upside

The 3 months correlation between Algorand and Whitbread is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Whitbread PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitbread PLC ADR 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 Whitbread PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitbread PLC ADR has no effect on the direction of Algorand i.e., Algorand and Whitbread PLC go up and down completely randomly.

Pair Corralation between Algorand and Whitbread PLC

Assuming the 90 days trading horizon Algorand is expected to generate 5.16 times more return on investment than Whitbread PLC. However, Algorand is 5.16 times more volatile than Whitbread PLC ADR. It trades about 0.26 of its potential returns per unit of risk. Whitbread PLC ADR is currently generating about -0.14 per unit of risk. If you would invest  11.00  in Algorand on October 24, 2024 and sell it today you would earn a total of  31.00  from holding Algorand or generate 281.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.65%
Values	Daily Returns

Algorand  vs.  Whitbread PLC ADR

Algorand

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 20 (%) 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.

Whitbread PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitbread PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Algorand and Whitbread PLC

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

The idea behind Algorand and Whitbread PLC ADR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.