Correlation Between Illuvium and DATA

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

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

Diversification Opportunities for Illuvium and DATA

0.91

Correlation Coefficient

Illuvium  DATA

Almost no diversification

The 3 months correlation between Illuvium and DATA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Illuvium and DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA and Illuvium 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 Illuvium are associated (or correlated) with DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA has no effect on the direction of Illuvium i.e., Illuvium and DATA go up and down completely randomly.

Pair Corralation between Illuvium and DATA

Assuming the 90 days trading horizon Illuvium is expected to under-perform the DATA. In addition to that, Illuvium is 1.05 times more volatile than DATA. It trades about -0.26 of its total potential returns per unit of risk. DATA is currently generating about -0.16 per unit of volatility. If you would invest  4.67  in DATA on November 27, 2024 and sell it today you would lose (2.57) from holding DATA or give up 55.03% of portfolio value over 90 days.

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

Illuvium  vs.  DATA

Illuvium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Illuvium 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 basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Illuvium shareholders.

DATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days DATA 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for DATA shareholders.

Pair Trading with Illuvium and DATA

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

The idea behind Illuvium and DATA 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.