Correlation Between Crypto and T M

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

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

Diversification Opportunities for Crypto and T M

-0.13

Correlation Coefficient

Crypto  T M

Good diversification

The 3 months correlation between Crypto and TMMI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Crypto Co and T M M in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T M M and Crypto 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 Crypto Co are associated (or correlated) with T M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T M M has no effect on the direction of Crypto i.e., Crypto and T M go up and down completely randomly.

Pair Corralation between Crypto and T M

Given the investment horizon of 90 days Crypto is expected to generate 1.59 times less return on investment than T M. But when comparing it to its historical volatility, Crypto Co is 2.21 times less risky than T M. It trades about 0.1 of its potential returns per unit of risk. T M M is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.11  in T M M on September 30, 2024 and sell it today you would lose (0.74) from holding T M M or give up 66.67% of portfolio value over 90 days.

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

Crypto Co  vs.  T M M

Crypto

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crypto Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Crypto is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

T M M

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in T M M are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal primary indicators, T M demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crypto and T M

The main advantage of trading using opposite Crypto and T M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crypto position performs unexpectedly, T M 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 T M will offset losses from the drop in T M's long position.

The idea behind Crypto Co and T M M 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.