Correlation Between Butterfly Network and NightFood Holdings

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

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

Diversification Opportunities for Butterfly Network and NightFood Holdings

-0.57

Correlation Coefficient

Butterfly Network  NightFood Holdings

Excellent diversification

The 3 months correlation between Butterfly and NightFood is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings 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 NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of Butterfly Network i.e., Butterfly Network and NightFood Holdings go up and down completely randomly.

Pair Corralation between Butterfly Network and NightFood Holdings

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.48 times less return on investment than NightFood Holdings. In addition to that, Butterfly Network is 1.13 times more volatile than NightFood Holdings. It trades about 0.14 of its total potential returns per unit of risk. NightFood Holdings is currently generating about 0.24 per unit of volatility. If you would invest  0.67  in NightFood Holdings on October 21, 2024 and sell it today you would earn a total of  0.23  from holding NightFood Holdings or generate 34.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Butterfly Network  vs.  NightFood Holdings

Butterfly Network

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 15 (%) 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.

NightFood Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NightFood Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NightFood Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Butterfly Network and NightFood Holdings

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

The idea behind Butterfly Network and NightFood Holdings 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.