Correlation Between GAIA and Wormhole

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

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

Diversification Opportunities for GAIA and Wormhole

-0.6

Correlation Coefficient

GAIA  Wormhole

Excellent diversification

The 3 months correlation between GAIA and Wormhole is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding GAIA and Wormhole in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wormhole and GAIA 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 GAIA are associated (or correlated) with Wormhole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wormhole has no effect on the direction of GAIA i.e., GAIA and Wormhole go up and down completely randomly.

Pair Corralation between GAIA and Wormhole

Assuming the 90 days trading horizon GAIA is expected to under-perform the Wormhole. In addition to that, GAIA is 1.5 times more volatile than Wormhole. It trades about -0.03 of its total potential returns per unit of risk. Wormhole is currently generating about 0.14 per unit of volatility. If you would invest  20.00  in Wormhole on September 1, 2024 and sell it today you would earn a total of  11.00  from holding Wormhole or generate 55.0% return on investment over 90 days.

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

GAIA  vs.  Wormhole

GAIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GAIA 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 fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for GAIA shareholders.

Wormhole

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wormhole are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Wormhole exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GAIA and Wormhole

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

The idea behind GAIA and Wormhole 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.