Correlation Between Gapwaves and Crunchfish

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

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

Diversification Opportunities for Gapwaves and Crunchfish

0.18

Correlation Coefficient

Gapwaves  Crunchfish

Average diversification

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

Pair Corralation between Gapwaves and Crunchfish

Assuming the 90 days trading horizon Gapwaves AB Series is expected to generate 0.32 times more return on investment than Crunchfish. However, Gapwaves AB Series is 3.1 times less risky than Crunchfish. It trades about -0.03 of its potential returns per unit of risk. Crunchfish AB is currently generating about -0.03 per unit of risk. If you would invest  2,895  in Gapwaves AB Series on September 26, 2024 and sell it today you would lose (1,367) from holding Gapwaves AB Series or give up 47.22% of portfolio value over 90 days.

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

Gapwaves AB Series  vs.  Crunchfish AB

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.

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Gapwaves and Crunchfish

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

The idea behind Gapwaves AB Series and Crunchfish AB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.