Correlation Between Blockchain Technologies and CI Europe

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

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

Diversification Opportunities for Blockchain Technologies and CI Europe

-0.54

Correlation Coefficient

Blockchain Technologies  CI Europe

Excellent diversification

The 3 months correlation between Blockchain and EHE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Blockchain Technologies ETF and CI Europe Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Europe Hedged and Blockchain Technologies 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 Blockchain Technologies ETF are associated (or correlated) with CI Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Europe Hedged has no effect on the direction of Blockchain Technologies i.e., Blockchain Technologies and CI Europe go up and down completely randomly.

Pair Corralation between Blockchain Technologies and CI Europe

Assuming the 90 days trading horizon Blockchain Technologies ETF is expected to generate 3.55 times more return on investment than CI Europe. However, Blockchain Technologies is 3.55 times more volatile than CI Europe Hedged. It trades about 0.2 of its potential returns per unit of risk. CI Europe Hedged is currently generating about -0.09 per unit of risk. If you would invest  1,442  in Blockchain Technologies ETF on August 31, 2024 and sell it today you would earn a total of  631.00  from holding Blockchain Technologies ETF or generate 43.76% return on investment over 90 days.

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

Blockchain Technologies ETF  vs.  CI Europe Hedged

Blockchain Technologies

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blockchain Technologies ETF are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Blockchain Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

CI Europe Hedged

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CI Europe Hedged has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, CI Europe is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Blockchain Technologies and CI Europe

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

The idea behind Blockchain Technologies ETF and CI Europe Hedged 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.