Correlation Between Tezos and HPB

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

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

Diversification Opportunities for Tezos and HPB

0.41

Correlation Coefficient

Tezos  HPB

Very weak diversification

The 3 months correlation between Tezos and HPB is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Tezos and HPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPB and Tezos 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 Tezos are associated (or correlated) with HPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPB has no effect on the direction of Tezos i.e., Tezos and HPB go up and down completely randomly.

Pair Corralation between Tezos and HPB

Assuming the 90 days trading horizon Tezos is expected to generate 0.67 times more return on investment than HPB. However, Tezos is 1.5 times less risky than HPB. It trades about 0.13 of its potential returns per unit of risk. HPB is currently generating about 0.08 per unit of risk. If you would invest  120.00  in Tezos on September 25, 2024 and sell it today you would earn a total of  22.00  from holding Tezos or generate 18.33% return on investment over 90 days.

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

Tezos  vs.  HPB

Tezos

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tezos are ranked lower than 14 (%) 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.

HPB

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Tezos and HPB

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

The idea behind Tezos and HPB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.