Correlation Between Cardano and Grayscale Stellar

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

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

Diversification Opportunities for Cardano and Grayscale Stellar

0.57

Correlation Coefficient

Cardano  Grayscale Stellar

Very weak diversification

The 3 months correlation between Cardano and Grayscale is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Grayscale Stellar Lumens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Stellar Lumens and Cardano 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 Cardano are associated (or correlated) with Grayscale Stellar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Stellar Lumens has no effect on the direction of Cardano i.e., Cardano and Grayscale Stellar go up and down completely randomly.

Pair Corralation between Cardano and Grayscale Stellar

Assuming the 90 days trading horizon Cardano is expected to under-perform the Grayscale Stellar. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cardano is 1.0 times less risky than Grayscale Stellar. The crypto coin trades about -0.02 of its potential returns per unit of risk. The Grayscale Stellar Lumens is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,225  in Grayscale Stellar Lumens on December 22, 2024 and sell it today you would lose (930.00) from holding Grayscale Stellar Lumens or give up 22.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Cardano  vs.  Grayscale Stellar Lumens

Cardano

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cardano has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Cardano shareholders.

Grayscale Stellar Lumens

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Stellar Lumens has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cardano and Grayscale Stellar

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

The idea behind Cardano and Grayscale Stellar Lumens 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.