Correlation Between GAIA and MNW

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

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

Diversification Opportunities for GAIA and MNW

-0.16

Correlation Coefficient

GAIA  MNW

Good diversification

The 3 months correlation between GAIA and MNW is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and MNW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNW and GAIA 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 GAIA are associated (or correlated) with MNW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNW has no effect on the direction of GAIA i.e., GAIA and MNW go up and down completely randomly.

Pair Corralation between GAIA and MNW

Assuming the 90 days trading horizon GAIA is expected to under-perform the MNW. But the crypto coin apears to be less risky and, when comparing its historical volatility, GAIA is 12.78 times less risky than MNW. The crypto coin trades about -0.07 of its potential returns per unit of risk. The MNW is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  75.00  in MNW on September 1, 2024 and sell it today you would lose (35.00) from holding MNW or give up 46.67% of portfolio value over 90 days.

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

GAIA  vs.  MNW

GAIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for GAIA shareholders.

MNW

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MNW are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, MNW exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAIA and MNW

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

The idea behind GAIA and MNW 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..