Correlation Between 21Shares Crypto and 21Shares Decentraland

Can any of the company-specific risk be diversified away by investing in both 21Shares Crypto and 21Shares Decentraland 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 21Shares Crypto and 21Shares Decentraland into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21Shares Crypto Basket and 21Shares Decentraland ETP, you can compare the effects of market volatilities on 21Shares Crypto and 21Shares Decentraland 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 21Shares Crypto with a short position of 21Shares Decentraland. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21Shares Crypto and 21Shares Decentraland.

Diversification Opportunities for 21Shares Crypto and 21Shares Decentraland

0.84

Correlation Coefficient

21Shares Crypto  21Shares Decentraland

Very poor diversification

The 3 months correlation between 21Shares and 21Shares is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding 21Shares Crypto Basket and 21Shares Decentraland ETP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Decentraland ETP and 21Shares Crypto 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 21Shares Crypto Basket are associated (or correlated) with 21Shares Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Decentraland ETP has no effect on the direction of 21Shares Crypto i.e., 21Shares Crypto and 21Shares Decentraland go up and down completely randomly.

Pair Corralation between 21Shares Crypto and 21Shares Decentraland

Assuming the 90 days trading horizon 21Shares Crypto is expected to generate 1.82 times less return on investment than 21Shares Decentraland. But when comparing it to its historical volatility, 21Shares Crypto Basket is 2.45 times less risky than 21Shares Decentraland. It trades about 0.24 of its potential returns per unit of risk. 21Shares Decentraland ETP is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  139.00  in 21Shares Decentraland ETP on August 31, 2024 and sell it today you would earn a total of  169.00  from holding 21Shares Decentraland ETP or generate 121.58% return on investment over 90 days.

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

21Shares Crypto Basket  vs.  21Shares Decentraland ETP

21Shares Crypto Basket

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Crypto Basket are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, 21Shares Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

21Shares Decentraland ETP

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Decentraland ETP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 21Shares Decentraland sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 21Shares Crypto and 21Shares Decentraland

The main advantage of trading using opposite 21Shares Crypto and 21Shares Decentraland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21Shares Crypto position performs unexpectedly, 21Shares Decentraland 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 21Shares Decentraland will offset losses from the drop in 21Shares Decentraland's long position.

The idea behind 21Shares Crypto Basket and 21Shares Decentraland ETP 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.