Correlation Between Crunchfish and Gapwaves

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

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

Diversification Opportunities for Crunchfish and Gapwaves

0.3

Correlation Coefficient

Crunchfish  Gapwaves

Weak diversification

The 3 months correlation between Crunchfish and Gapwaves is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Crunchfish AB and Gapwaves AB Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gapwaves AB Series and Crunchfish 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 Crunchfish AB are associated (or correlated) with Gapwaves. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gapwaves AB Series has no effect on the direction of Crunchfish i.e., Crunchfish and Gapwaves go up and down completely randomly.

Pair Corralation between Crunchfish and Gapwaves

Assuming the 90 days trading horizon Crunchfish AB is expected to under-perform the Gapwaves. But the stock apears to be less risky and, when comparing its historical volatility, Crunchfish AB is 1.55 times less risky than Gapwaves. The stock trades about -0.42 of its potential returns per unit of risk. The Gapwaves AB Series is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,274  in Gapwaves AB Series on October 14, 2024 and sell it today you would earn a total of  140.00  from holding Gapwaves AB Series or generate 10.99% return on investment over 90 days.

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

Crunchfish AB  vs.  Gapwaves AB Series

Crunchfish AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crunchfish AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gapwaves AB Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gapwaves AB Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Crunchfish and Gapwaves

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

The idea behind Crunchfish AB and Gapwaves AB Series 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.