Correlation Between MWAT and Altlayer

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

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

Diversification Opportunities for MWAT and Altlayer

-0.18

Correlation Coefficient

MWAT  Altlayer

Good diversification

The 3 months correlation between MWAT and Altlayer is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding MWAT and Altlayer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altlayer and MWAT 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 MWAT are associated (or correlated) with Altlayer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altlayer has no effect on the direction of MWAT i.e., MWAT and Altlayer go up and down completely randomly.

Pair Corralation between MWAT and Altlayer

Assuming the 90 days trading horizon MWAT is expected to generate 87.24 times less return on investment than Altlayer. But when comparing it to its historical volatility, MWAT is 12.83 times less risky than Altlayer. It trades about 0.01 of its potential returns per unit of risk. Altlayer is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Altlayer on February 7, 2024 and sell it today you would earn a total of  39.00  from holding Altlayer or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.2%
Values	Daily Returns

MWAT  vs.  Altlayer

MWAT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MWAT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, MWAT is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Altlayer

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altlayer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Altlayer exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MWAT and Altlayer

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

The idea behind MWAT and Altlayer 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.