Correlation Between Lido DAO and ApeCoin

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

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

Diversification Opportunities for Lido DAO and ApeCoin

0.39

Correlation Coefficient

Lido DAO  ApeCoin

Weak diversification

The 3 months correlation between Lido and ApeCoin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lido DAO and ApeCoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ApeCoin 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 ApeCoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ApeCoin has no effect on the direction of Lido DAO i.e., Lido DAO and ApeCoin go up and down completely randomly.

Pair Corralation between Lido DAO and ApeCoin

Assuming the 90 days trading horizon Lido DAO is expected to generate 1.1 times more return on investment than ApeCoin. However, Lido DAO is 1.1 times more volatile than ApeCoin. It trades about 0.13 of its potential returns per unit of risk. ApeCoin is currently generating about -0.05 per unit of risk. If you would invest  111.00  in Lido DAO on November 19, 2024 and sell it today you would earn a total of  70.00  from holding Lido DAO or generate 63.06% return on investment over 90 days.

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

Lido DAO  vs.  ApeCoin

Lido DAO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lido DAO are ranked lower than 10 (%) 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.

ApeCoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days ApeCoin 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 technical and 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 ApeCoin shareholders.

Pair Trading with Lido DAO and ApeCoin

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

The idea behind Lido DAO and ApeCoin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.