Correlation Between Netcapital and Riot Blockchain

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

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

Diversification Opportunities for Netcapital and Riot Blockchain

0.28

Correlation Coefficient

Netcapital  Riot Blockchain

Modest diversification

The 3 months correlation between Netcapital and Riot is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital and Riot Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riot Blockchain and Netcapital 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 Netcapital are associated (or correlated) with Riot Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riot Blockchain has no effect on the direction of Netcapital i.e., Netcapital and Riot Blockchain go up and down completely randomly.

Pair Corralation between Netcapital and Riot Blockchain

Given the investment horizon of 90 days Netcapital is expected to generate 0.73 times more return on investment than Riot Blockchain. However, Netcapital is 1.38 times less risky than Riot Blockchain. It trades about -0.04 of its potential returns per unit of risk. Riot Blockchain is currently generating about -0.05 per unit of risk. If you would invest  14.00  in Netcapital on February 1, 2024 and sell it today you would lose (1.00) from holding Netcapital or give up 7.14% of portfolio value over 90 days.

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

Netcapital  vs.  Riot Blockchain

Netcapital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Riot Blockchain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riot Blockchain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Riot Blockchain is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Netcapital and Riot Blockchain

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

The idea behind Netcapital and Riot Blockchain 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.