Correlation Between DATA and BITM

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

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

Diversification Opportunities for DATA and BITM

-0.27

Correlation Coefficient

DATA  BITM

Very good diversification

The 3 months correlation between DATA and BITM is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding DATA and BITM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BITM and DATA 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 DATA are associated (or correlated) with BITM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BITM has no effect on the direction of DATA i.e., DATA and BITM go up and down completely randomly.

Pair Corralation between DATA and BITM

If you would invest  3.44  in DATA on August 30, 2024 and sell it today you would earn a total of  1.10  from holding DATA or generate 31.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

DATA  vs.  BITM

DATA

Risk-Adjusted Performance

8 of 100

OK

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

BITM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BITM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BITM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DATA and BITM

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

The idea behind DATA and BITM 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.