Correlation Between Maker and Sandbox

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

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

Diversification Opportunities for Maker and Sandbox

0.22

Correlation Coefficient

Maker  Sandbox

Modest diversification

The 3 months correlation between Maker and Sandbox is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Maker and The Sandbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandbox 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 Sandbox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandbox has no effect on the direction of Maker i.e., Maker and Sandbox go up and down completely randomly.

Pair Corralation between Maker and Sandbox

Assuming the 90 days trading horizon Maker is expected to generate 1.14 times more return on investment than Sandbox. However, Maker is 1.14 times more volatile than The Sandbox. It trades about 0.0 of its potential returns per unit of risk. The Sandbox is currently generating about -0.17 per unit of risk. If you would invest  149,147  in Maker on December 30, 2024 and sell it today you would lose (20,078) from holding Maker or give up 13.46% 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.  The Sandbox

Maker

Risk-Adjusted Performance

Very Weak

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

Sandbox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Sandbox 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for The Sandbox shareholders.

Pair Trading with Maker and Sandbox

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

The idea behind Maker and The Sandbox 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.