Correlation Between Butterfly Network and Applied Blockchain

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

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

Diversification Opportunities for Butterfly Network and Applied Blockchain

0.64

Correlation Coefficient

Butterfly Network  Applied Blockchain

Poor diversification

The 3 months correlation between Butterfly and Applied is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain and Butterfly Network 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 Butterfly Network are associated (or correlated) with Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Butterfly Network i.e., Butterfly Network and Applied Blockchain go up and down completely randomly.

Pair Corralation between Butterfly Network and Applied Blockchain

Given the investment horizon of 90 days Butterfly Network is expected to generate 2.29 times less return on investment than Applied Blockchain. But when comparing it to its historical volatility, Butterfly Network is 1.32 times less risky than Applied Blockchain. It trades about 0.04 of its potential returns per unit of risk. Applied Blockchain is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  183.00  in Applied Blockchain on September 17, 2024 and sell it today you would earn a total of  707.00  from holding Applied Blockchain or generate 386.34% return on investment over 90 days.

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

Butterfly Network  vs.  Applied Blockchain

Butterfly Network

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Applied Blockchain

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Butterfly Network and Applied Blockchain

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

The idea behind Butterfly Network and Applied Blockchain 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.