Correlation Between DGB and GAIA

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

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

Diversification Opportunities for DGB and GAIA

0.09

Correlation Coefficient

DGB  GAIA

Significant diversification

The 3 months correlation between DGB and GAIA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding DGB and GAIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAIA and DGB 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 DGB are associated (or correlated) with GAIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAIA has no effect on the direction of DGB i.e., DGB and GAIA go up and down completely randomly.

Pair Corralation between DGB and GAIA

Assuming the 90 days trading horizon DGB is expected to under-perform the GAIA. In addition to that, DGB is 1.02 times more volatile than GAIA. It trades about -0.01 of its total potential returns per unit of risk. GAIA is currently generating about 0.04 per unit of volatility. If you would invest  0.20  in GAIA on November 27, 2024 and sell it today you would lose  0.00  from holding GAIA or give up 0.05% of portfolio value over 90 days.

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

DGB  vs.  GAIA

DGB

Risk-Adjusted Performance

Very Weak

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

GAIA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GAIA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, GAIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DGB and GAIA

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

The idea behind DGB and GAIA 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.