Correlation Between Aptos and Compound

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

By analyzing existing cross correlation between Aptos and Compound, you can compare the effects of market volatilities on Aptos and Compound 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 Aptos with a short position of Compound. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aptos and Compound.

Diversification Opportunities for Aptos and Compound

0.65

Correlation Coefficient

Aptos  Compound

Poor diversification

The 3 months correlation between Aptos and Compound is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Aptos and Compound in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compound and Aptos 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 Aptos are associated (or correlated) with Compound. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compound has no effect on the direction of Aptos i.e., Aptos and Compound go up and down completely randomly.

Pair Corralation between Aptos and Compound

Assuming the 90 days trading horizon Aptos is expected to generate 1.45 times less return on investment than Compound. But when comparing it to its historical volatility, Aptos is 1.05 times less risky than Compound. It trades about 0.04 of its potential returns per unit of risk. Compound is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,370  in Compound on October 8, 2024 and sell it today you would earn a total of  2,075  from holding Compound or generate 32.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Aptos  vs.  Compound

Aptos

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aptos are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aptos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Compound

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compound are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Compound exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aptos and Compound

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

The idea behind Aptos and Compound 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.