Correlation Between GMX and Cardano

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

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

Diversification Opportunities for GMX and Cardano

0.86

Correlation Coefficient

GMX  Cardano

Very poor diversification

The 3 months correlation between GMX and Cardano is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GMX and Cardano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardano and GMX 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 GMX are associated (or correlated) with Cardano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardano has no effect on the direction of GMX i.e., GMX and Cardano go up and down completely randomly.

Pair Corralation between GMX and Cardano

Assuming the 90 days trading horizon GMX is expected to generate 4.21 times less return on investment than Cardano. But when comparing it to its historical volatility, GMX is 1.24 times less risky than Cardano. It trades about 0.1 of its potential returns per unit of risk. Cardano is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Cardano on September 1, 2024 and sell it today you would earn a total of  76.00  from holding Cardano or generate 237.5% return on investment over 90 days.

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

GMX  vs.  Cardano

GMX

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GMX are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, GMX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cardano

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cardano are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cardano exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GMX and Cardano

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

The idea behind GMX and Cardano 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.