Correlation Between Tokocrypto and SMART

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

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

Diversification Opportunities for Tokocrypto and SMART

0.65

Correlation Coefficient

Tokocrypto  SMART

Poor diversification

The 3 months correlation between Tokocrypto and SMART is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tokocrypto and SMART in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMART and Tokocrypto 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 Tokocrypto are associated (or correlated) with SMART. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMART has no effect on the direction of Tokocrypto i.e., Tokocrypto and SMART go up and down completely randomly.

Pair Corralation between Tokocrypto and SMART

Assuming the 90 days trading horizon Tokocrypto is expected to generate 1.7 times less return on investment than SMART. But when comparing it to its historical volatility, Tokocrypto is 2.44 times less risky than SMART. It trades about 0.05 of its potential returns per unit of risk. SMART is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.07  in SMART on October 11, 2024 and sell it today you would lose (0.07) from holding SMART or give up 95.18% of portfolio value over 90 days.

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

Tokocrypto  vs.  SMART

Tokocrypto

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tokocrypto are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tokocrypto exhibited solid returns over the last few months and may actually be approaching a breakup point.

SMART

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SMART are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SMART exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tokocrypto and SMART

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

The idea behind Tokocrypto and SMART 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.