Correlation Between Basic Attention and UMA

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

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

Diversification Opportunities for Basic Attention and UMA

0.95

Correlation Coefficient

Basic Attention  UMA

Almost no diversification

The 3 months correlation between Basic and UMA is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Basic Attention Token and UMA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMA and Basic Attention 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 Basic Attention Token are associated (or correlated) with UMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMA has no effect on the direction of Basic Attention i.e., Basic Attention and UMA go up and down completely randomly.

Pair Corralation between Basic Attention and UMA

Assuming the 90 days trading horizon Basic Attention Token is expected to generate 0.98 times more return on investment than UMA. However, Basic Attention Token is 1.02 times less risky than UMA. It trades about -0.11 of its potential returns per unit of risk. UMA is currently generating about -0.13 per unit of risk. If you would invest  33.00  in Basic Attention Token on November 28, 2024 and sell it today you would lose (16.00) from holding Basic Attention Token or give up 48.48% of portfolio value over 90 days.

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

Basic Attention Token  vs.  UMA

Basic Attention Token

Risk-Adjusted Performance

Very Weak

Over the last 90 days Basic Attention Token has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Basic Attention Token shareholders.

UMA

Risk-Adjusted Performance

Very Weak

Over the last 90 days UMA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for UMA shareholders.

Pair Trading with Basic Attention and UMA

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

The idea behind Basic Attention Token and UMA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.