Correlation Between Avalanche and Stratis

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

Diversification Opportunities for Avalanche and Stratis

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Avalanche and Stratis is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Stratis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratis and Avalanche 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 Avalanche are associated (or correlated) with Stratis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratis has no effect on the direction of Avalanche i.e., Avalanche and Stratis go up and down completely randomly.

Pair Corralation between Avalanche and Stratis

Assuming the 90 days trading horizon Avalanche is expected to under-perform the Stratis. In addition to that, Avalanche is 1.14 times more volatile than Stratis. It trades about -0.17 of its total potential returns per unit of risk. Stratis is currently generating about -0.09 per unit of volatility. If you would invest  58.00  in Stratis on September 4, 2022 and sell it today you would lose (10.00)  from holding Stratis or give up 17.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Avalanche  vs.  Stratis

 Performance (%) 
       Timeline  
Avalanche 
Avalanche Performance
0 of 100
Over the last 90 days Avalanche 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for Avalanche investors.

Avalanche Price Channel

Stratis 
Stratis Performance
0 of 100
Over the last 90 days Stratis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Stratis is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stratis Price Channel

Avalanche and Stratis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avalanche and Stratis

The main advantage of trading using opposite Avalanche and Stratis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, Stratis 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 Stratis will offset losses from the drop in Stratis' long position.
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The idea behind Avalanche and Stratis 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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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 Transaction History module to view history of all your transactions and understand their impact on performance.

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