Correlation Between ADA and ATOM

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

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

Diversification Opportunities for ADA and ATOM

0.84

Correlation Coefficient

ADA  ATOM

Very poor diversification

The 3 months correlation between ADA and ATOM is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ADA and ATOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATOM and ADA 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 ADA are associated (or correlated) with ATOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATOM has no effect on the direction of ADA i.e., ADA and ATOM go up and down completely randomly.

Pair Corralation between ADA and ATOM

Assuming the 90 days trading horizon ADA is expected to generate 1.16 times more return on investment than ATOM. However, ADA is 1.16 times more volatile than ATOM. It trades about 0.07 of its potential returns per unit of risk. ATOM is currently generating about 0.02 per unit of risk. If you would invest  71.00  in ADA on April 25, 2025 and sell it today you would earn a total of  10.00  from holding ADA or generate 14.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

ADA  vs.  ATOM

ADA

Risk-Adjusted Performance

Modest

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

ATOM

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ATOM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ATOM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ADA and ATOM

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

The idea behind ADA and ATOM 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.