Correlation Between Netcapital and Applied Blockchain

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

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

Diversification Opportunities for Netcapital and Applied Blockchain

-0.56

Correlation Coefficient

Netcapital  Applied Blockchain

Excellent diversification

The 3 months correlation between Netcapital and Applied is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain and Netcapital 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 Netcapital are associated (or correlated) with Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Netcapital i.e., Netcapital and Applied Blockchain go up and down completely randomly.

Pair Corralation between Netcapital and Applied Blockchain

Given the investment horizon of 90 days Netcapital is expected to under-perform the Applied Blockchain. But the stock apears to be less risky and, when comparing its historical volatility, Netcapital is 1.68 times less risky than Applied Blockchain. The stock trades about -0.05 of its potential returns per unit of risk. The Applied Blockchain is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Applied Blockchain on August 31, 2024 and sell it today you would earn a total of  651.00  from holding Applied Blockchain or generate 206.67% return on investment over 90 days.

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

Netcapital  vs.  Applied Blockchain

Netcapital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Applied Blockchain

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Netcapital and Applied Blockchain

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

The idea behind Netcapital and Applied Blockchain 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.