Correlation Between API3 and Chroma

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Can any of the company-specific risk be diversified away by investing in both API3 and Chroma 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 API3 and Chroma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between API3 and Chroma, you can compare the effects of market volatilities on API3 and Chroma 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 API3 with a short position of Chroma. Check out your portfolio center. Please also check ongoing floating volatility patterns of API3 and Chroma.

Diversification Opportunities for API3 and Chroma

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between API3 and Chroma is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding API3 and Chroma in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Chroma and API3 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 API3 are associated (or correlated) with Chroma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma has no effect on the direction of API3 i.e., API3 and Chroma go up and down completely randomly.

Pair Corralation between API3 and Chroma

Assuming the 90 days trading horizon API3 is expected to under-perform the Chroma. In addition to that, API3 is 1.11 times more volatile than Chroma. It trades about -0.28 of its total potential returns per unit of risk. Chroma is currently generating about -0.26 per unit of volatility. If you would invest  44.00  in Chroma on February 17, 2022 and sell it today you would lose (22.00)  from holding Chroma or give up 50.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.45%
ValuesDaily Returns

API3  vs.  Chroma

 Performance (%) 
      Timeline 
API3 
API3 Performance
0 of 100
Over the last 90 days API3 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's forward indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for API3 investors.

API3 Price Channel

Chroma 
Chroma Performance
0 of 100
Over the last 90 days Chroma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's technical indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for Chroma investors.

Chroma Price Channel

API3 and Chroma Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with API3 and Chroma

The main advantage of trading using opposite API3 and Chroma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if API3 position performs unexpectedly, Chroma 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 Chroma will offset losses from the drop in Chroma's long position.
The idea behind API3 and Chroma 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 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.

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