Correlation Between Binance Coin and Paramount Resources

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

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

Diversification Opportunities for Binance Coin and Paramount Resources

0.73

Correlation Coefficient

Binance Coin  Paramount Resources

Poor diversification

The 3 months correlation between Binance and Paramount is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources and Binance Coin 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 Binance Coin are associated (or correlated) with Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Binance Coin i.e., Binance Coin and Paramount Resources go up and down completely randomly.

Pair Corralation between Binance Coin and Paramount Resources

Assuming the 90 days trading horizon Binance Coin is expected to generate 4.44 times more return on investment than Paramount Resources. However, Binance Coin is 4.44 times more volatile than Paramount Resources. It trades about 0.06 of its potential returns per unit of risk. Paramount Resources is currently generating about 0.02 per unit of risk. If you would invest  29,904  in Binance Coin on October 11, 2024 and sell it today you would earn a total of  39,686  from holding Binance Coin or generate 132.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	60.0%
Values	Daily Returns

Binance Coin  vs.  Paramount Resources

Binance Coin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Paramount Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Paramount Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Binance Coin and Paramount Resources

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

The idea behind Binance Coin and Paramount Resources 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.