Correlation Between Illuvium and Uniswap Protocol

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

By analyzing existing cross correlation between Illuvium and Uniswap Protocol Token, you can compare the effects of market volatilities on Illuvium and Uniswap Protocol 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 Uniswap Protocol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illuvium and Uniswap Protocol.

Diversification Opportunities for Illuvium and Uniswap Protocol

0.53

Correlation Coefficient

Illuvium  Uniswap Protocol

Very weak diversification

The 3 months correlation between Illuvium and Uniswap is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Illuvium and Uniswap Protocol Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniswap Protocol Token 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 Uniswap Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniswap Protocol Token has no effect on the direction of Illuvium i.e., Illuvium and Uniswap Protocol go up and down completely randomly.

Pair Corralation between Illuvium and Uniswap Protocol

Assuming the 90 days trading horizon Illuvium is expected to generate 1.88 times less return on investment than Uniswap Protocol. But when comparing it to its historical volatility, Illuvium is 1.13 times less risky than Uniswap Protocol. It trades about 0.14 of its potential returns per unit of risk. Uniswap Protocol Token is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Uniswap Protocol Token on August 30, 2024 and sell it today you would earn a total of  723.00  from holding Uniswap Protocol Token or generate 121.51% return on investment over 90 days.

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

Illuvium  vs.  Uniswap Protocol Token

Illuvium

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Illuvium are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Illuvium exhibited solid returns over the last few months and may actually be approaching a breakup point.

Uniswap Protocol Token

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Uniswap Protocol Token are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Uniswap Protocol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Illuvium and Uniswap Protocol

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

The idea behind Illuvium and Uniswap Protocol Token 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.