Correlation Between Caravel Minerals and BTC Health

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

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

Diversification Opportunities for Caravel Minerals and BTC Health

0.18

Correlation Coefficient

Caravel Minerals  BTC Health

Average diversification

The 3 months correlation between Caravel and BTC is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Caravel Minerals and BTC Health Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Health Limited and Caravel Minerals 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 Caravel Minerals are associated (or correlated) with BTC Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Health Limited has no effect on the direction of Caravel Minerals i.e., Caravel Minerals and BTC Health go up and down completely randomly.

Pair Corralation between Caravel Minerals and BTC Health

Assuming the 90 days trading horizon Caravel Minerals is expected to generate 3.59 times less return on investment than BTC Health. But when comparing it to its historical volatility, Caravel Minerals is 1.48 times less risky than BTC Health. It trades about 0.12 of its potential returns per unit of risk. BTC Health Limited is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  5.00  in BTC Health Limited on October 9, 2024 and sell it today you would earn a total of  2.60  from holding BTC Health Limited or generate 52.0% return on investment over 90 days.

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

Caravel Minerals  vs.  BTC Health Limited

Caravel Minerals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Caravel Minerals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Caravel Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

BTC Health Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Health Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, BTC Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caravel Minerals and BTC Health

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

The idea behind Caravel Minerals and BTC Health Limited 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.