Correlation Between Lido DAO and Cardano

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

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

Diversification Opportunities for Lido DAO and Cardano

0.79

Correlation Coefficient

Lido DAO  Cardano

Poor diversification

The 3 months correlation between Lido and Cardano is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lido DAO and Cardano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardano and Lido DAO 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 Lido DAO 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 Lido DAO i.e., Lido DAO and Cardano go up and down completely randomly.

Pair Corralation between Lido DAO and Cardano

Assuming the 90 days trading horizon Lido DAO is expected to generate 1.76 times less return on investment than Cardano. In addition to that, Lido DAO is 1.18 times more volatile than Cardano. It trades about 0.16 of its total potential returns per unit of risk. Cardano is currently generating about 0.33 per unit of volatility. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Lido DAO  vs.  Cardano

Lido DAO

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lido DAO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Lido DAO 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 Lido DAO and Cardano

The main advantage of trading using opposite Lido DAO and Cardano positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lido DAO 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 Lido DAO 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.