Correlation Between STEPN and Dogecoin

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

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

Diversification Opportunities for STEPN and Dogecoin

0.77

Correlation Coefficient

STEPN  Dogecoin

Poor diversification

The 3 months correlation between STEPN and Dogecoin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding STEPN and Dogecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dogecoin and STEPN 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 STEPN are associated (or correlated) with Dogecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dogecoin has no effect on the direction of STEPN i.e., STEPN and Dogecoin go up and down completely randomly.

Pair Corralation between STEPN and Dogecoin

Assuming the 90 days trading horizon STEPN is expected to generate 1.92 times less return on investment than Dogecoin. But when comparing it to its historical volatility, STEPN is 1.4 times less risky than Dogecoin. It trades about 0.18 of its potential returns per unit of risk. Dogecoin is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  9.68  in Dogecoin on September 1, 2024 and sell it today you would earn a total of  32.32  from holding Dogecoin or generate 333.88% return on investment over 90 days.

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

STEPN  vs.  Dogecoin

STEPN

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STEPN are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, STEPN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dogecoin

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dogecoin are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Dogecoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STEPN and Dogecoin

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

The idea behind STEPN and Dogecoin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.