Correlation Between Sandbox and Tezos

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

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

Diversification Opportunities for Sandbox and Tezos

0.9

Correlation Coefficient

Sandbox  Tezos

Almost no diversification

The 3 months correlation between Sandbox and Tezos is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Sandbox and Tezos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tezos and Sandbox 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 The Sandbox are associated (or correlated) with Tezos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tezos has no effect on the direction of Sandbox i.e., Sandbox and Tezos go up and down completely randomly.

Pair Corralation between Sandbox and Tezos

Assuming the 90 days trading horizon The Sandbox is expected to generate 1.72 times more return on investment than Tezos. However, Sandbox is 1.72 times more volatile than Tezos. It trades about 0.21 of its potential returns per unit of risk. Tezos is currently generating about 0.24 per unit of risk. If you would invest  25.00  in The Sandbox on August 30, 2024 and sell it today you would earn a total of  36.00  from holding The Sandbox or generate 144.0% return on investment over 90 days.

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

The Sandbox  vs.  Tezos

Sandbox

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Sandbox are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Sandbox exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tezos

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tezos are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tezos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandbox and Tezos

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

The idea behind The Sandbox and Tezos 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.