Correlation Between Binance Coin and SP Funds

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

By analyzing existing cross correlation between Binance Coin and SP Funds Dow, you can compare the effects of market volatilities on Binance Coin and SP Funds 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 SP Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binance Coin and SP Funds.

Diversification Opportunities for Binance Coin and SP Funds

-0.25

Correlation Coefficient

Binance Coin  SP Funds

Very good diversification

The 3 months correlation between Binance and SPSK is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and SP Funds Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Funds Dow 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 SP Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Funds Dow has no effect on the direction of Binance Coin i.e., Binance Coin and SP Funds go up and down completely randomly.

Pair Corralation between Binance Coin and SP Funds

Assuming the 90 days trading horizon Binance Coin is expected to generate 25.3 times more return on investment than SP Funds. However, Binance Coin is 25.3 times more volatile than SP Funds Dow. It trades about 0.08 of its potential returns per unit of risk. SP Funds Dow is currently generating about 0.04 per unit of risk. If you would invest  24,244  in Binance Coin on October 24, 2024 and sell it today you would earn a total of  44,996  from holding Binance Coin or generate 185.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.72%
Values	Daily Returns

Binance Coin  vs.  SP Funds Dow

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.

SP Funds Dow

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Funds Dow has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, SP Funds is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Binance Coin and SP Funds

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

The idea behind Binance Coin and SP Funds Dow 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.