Correlation Between Bakkt Holdings and MicroAlgo

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

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

Diversification Opportunities for Bakkt Holdings and MicroAlgo

-0.33

Correlation Coefficient

Bakkt Holdings  MicroAlgo

Very good diversification

The 3 months correlation between Bakkt and MicroAlgo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bakkt Holdings and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo and Bakkt Holdings 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 Bakkt Holdings are associated (or correlated) with MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of Bakkt Holdings i.e., Bakkt Holdings and MicroAlgo go up and down completely randomly.

Pair Corralation between Bakkt Holdings and MicroAlgo

Given the investment horizon of 90 days Bakkt Holdings is expected to generate 1.99 times more return on investment than MicroAlgo. However, Bakkt Holdings is 1.99 times more volatile than MicroAlgo. It trades about 0.11 of its potential returns per unit of risk. MicroAlgo is currently generating about -0.07 per unit of risk. If you would invest  1,304  in Bakkt Holdings on August 31, 2024 and sell it today you would earn a total of  1,349  from holding Bakkt Holdings or generate 103.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Bakkt Holdings  vs.  MicroAlgo

Bakkt Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bakkt Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, Bakkt Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

MicroAlgo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroAlgo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bakkt Holdings and MicroAlgo

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

The idea behind Bakkt Holdings and MicroAlgo 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.