Correlation Between Quant and RocketPool

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

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

Diversification Opportunities for Quant and RocketPool

0.79

Correlation Coefficient

Quant  RocketPool

Poor diversification

The 3 months correlation between Quant and RocketPool is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Quant and RocketPool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RocketPool 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 RocketPool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RocketPool has no effect on the direction of Quant i.e., Quant and RocketPool go up and down completely randomly.

Pair Corralation between Quant and RocketPool

Assuming the 90 days trading horizon Quant is expected to generate 0.87 times more return on investment than RocketPool. However, Quant is 1.15 times less risky than RocketPool. It trades about 0.04 of its potential returns per unit of risk. RocketPool is currently generating about -0.09 per unit of risk. If you would invest  9,803  in Quant on November 28, 2024 and sell it today you would earn a total of  92.00  from holding Quant or generate 0.94% return on investment over 90 days.

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

Quant  vs.  RocketPool

Quant

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant exhibited solid returns over the last few months and may actually be approaching a breakup point.

RocketPool

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Quant and RocketPool

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

The idea behind Quant and RocketPool 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.