Correlation Between TRON and MANTRA

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

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

Diversification Opportunities for TRON and MANTRA

0.81

Correlation Coefficient

TRON  MANTRA

Very poor diversification

The 3 months correlation between TRON and MANTRA is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding TRON and MANTRA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MANTRA and TRON 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 TRON are associated (or correlated) with MANTRA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MANTRA has no effect on the direction of TRON i.e., TRON and MANTRA go up and down completely randomly.

Pair Corralation between TRON and MANTRA

Assuming the 90 days trading horizon TRON is expected to under-perform the MANTRA. In addition to that, TRON is 1.37 times more volatile than MANTRA. It trades about -0.06 of its total potential returns per unit of risk. MANTRA is currently generating about -0.04 per unit of volatility. If you would invest  402.00  in MANTRA on October 9, 2024 and sell it today you would lose (13.00) from holding MANTRA or give up 3.23% of portfolio value over 90 days.

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

TRON  vs.  MANTRA

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

MANTRA

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with TRON and MANTRA

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

The idea behind TRON and MANTRA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.