Correlation Between Social Life and APT Systems

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

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

Diversification Opportunities for Social Life and APT Systems

-0.21

Correlation Coefficient

Social Life  APT Systems

Very good diversification

The 3 months correlation between Social and APT is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Social Life Network and APT Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APT Systems and Social Life 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 Social Life Network are associated (or correlated) with APT Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APT Systems has no effect on the direction of Social Life i.e., Social Life and APT Systems go up and down completely randomly.

Pair Corralation between Social Life and APT Systems

Given the investment horizon of 90 days Social Life Network is expected to generate 1.01 times more return on investment than APT Systems. However, Social Life is 1.01 times more volatile than APT Systems. It trades about 0.05 of its potential returns per unit of risk. APT Systems is currently generating about 0.05 per unit of risk. If you would invest  0.19  in Social Life Network on October 10, 2024 and sell it today you would lose (0.15) from holding Social Life Network or give up 78.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Social Life Network  vs.  APT Systems

Social Life Network

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Social Life Network are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady essential indicators, Social Life reported solid returns over the last few months and may actually be approaching a breakup point.

APT Systems

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in APT Systems are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, APT Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Social Life and APT Systems

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

The idea behind Social Life Network and APT Systems 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.