Correlation Between Quant and 0x

Can any of the company-specific risk be diversified away by investing in both Quant and 0x 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 Quant and 0x into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Quant and 0x, you can compare the effects of market volatilities on Quant and 0x 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 Quant with a short position of 0x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quant and 0x.

Diversification Opportunities for Quant and 0x

0.78

Correlation Coefficient

Quant  0x

Poor diversification

The 3 months correlation between Quant and 0x is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Quant and 0x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 0x and Quant 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 Quant are associated (or correlated) with 0x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 0x has no effect on the direction of Quant i.e., Quant and 0x go up and down completely randomly.

Pair Corralation between Quant and 0x

Assuming the 90 days trading horizon Quant is expected to generate 9.58 times less return on investment than 0x. But when comparing it to its historical volatility, Quant is 2.54 times less risky than 0x. It trades about 0.04 of its potential returns per unit of risk. 0x is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  36.00  in 0x on January 24, 2024 and sell it today you would earn a total of  20.00  from holding 0x or generate 55.56% return on investment over 90 days.

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

Quant  vs.  0x

Quant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant may actually be approaching a critical reversion point that can send shares even higher in May 2024.

0x

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 0x are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, 0x exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quant and 0x

The main advantage of trading using opposite Quant and 0x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quant position performs unexpectedly, 0x 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 0x will offset losses from the drop in 0x's long position.

The idea behind Quant and 0x 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.