Correlation Between Avalanche and Gnosis

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

By analyzing existing cross correlation between Avalanche and Gnosis, you can compare the effects of market volatilities on Avalanche and Gnosis 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 Gnosis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and Gnosis.

Diversification Opportunities for Avalanche and Gnosis

0.51

Correlation Coefficient

Avalanche  Gnosis

Very weak diversification

The 3 months correlation between Avalanche and Gnosis is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Gnosis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnosis 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 Gnosis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnosis has no effect on the direction of Avalanche i.e., Avalanche and Gnosis go up and down completely randomly.

Pair Corralation between Avalanche and Gnosis

Assuming the 90 days trading horizon Avalanche is expected to under-perform the Gnosis. In addition to that, Avalanche is 1.26 times more volatile than Gnosis. It trades about -0.31 of its total potential returns per unit of risk. Gnosis is currently generating about -0.07 per unit of volatility. If you would invest  36,163  in Gnosis on January 28, 2024 and sell it today you would lose (3,438) from holding Gnosis or give up 9.51% of portfolio value over 90 days.

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

Avalanche  vs.  Gnosis

Avalanche

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Avalanche may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Gnosis

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gnosis are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Gnosis exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avalanche and Gnosis

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

The idea behind Avalanche and Gnosis 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.