Correlation Between Maker and REN

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

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

Diversification Opportunities for Maker and REN

0.27

Correlation Coefficient

Maker  REN

Modest diversification

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

Pair Corralation between Maker and REN

Assuming the 90 days trading horizon Maker is expected to generate 0.7 times more return on investment than REN. However, Maker is 1.43 times less risky than REN. It trades about 0.02 of its potential returns per unit of risk. REN is currently generating about -0.16 per unit of risk. If you would invest  149,147  in Maker on December 28, 2024 and sell it today you would lose (5,272) from holding Maker or give up 3.53% of portfolio value over 90 days.

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

Maker  vs.  REN

Maker

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker may actually be approaching a critical reversion point that can send shares even higher in April 2025.

REN

Risk-Adjusted Performance

Very Weak

Over the last 90 days REN 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for REN shareholders.

Pair Trading with Maker and REN

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

The idea behind Maker and REN 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.