Correlation Between Quant and Maker

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

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

Diversification Opportunities for Quant and Maker

0.32

Correlation Coefficient

Quant  Maker

Weak diversification

The 3 months correlation between Quant and Maker is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Quant and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker and Quant 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 Quant are associated (or correlated) with Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of Quant i.e., Quant and Maker go up and down completely randomly.

Pair Corralation between Quant and Maker

Assuming the 90 days trading horizon Quant is expected to under-perform the Maker. But the crypto coin apears to be less risky and, when comparing its historical volatility, Quant is 1.32 times less risky than Maker. The crypto coin trades about -0.12 of its potential returns per unit of risk. The Maker is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  149,147  in Maker on December 29, 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

Quant  vs.  Maker

Quant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quant 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 Quant shareholders.

Maker

Risk-Adjusted Performance

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.

Pair Trading with Quant and Maker

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

The idea behind Quant and Maker 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.