Correlation Between Loopring and UMA

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

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

Diversification Opportunities for Loopring and UMA

0.36

Correlation Coefficient

Loopring  UMA

Weak diversification

The 3 months correlation between Loopring and UMA is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Loopring and UMA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMA and Loopring 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 Loopring are associated (or correlated) with UMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMA has no effect on the direction of Loopring i.e., Loopring and UMA go up and down completely randomly.

Pair Corralation between Loopring and UMA

Assuming the 90 days trading horizon Loopring is expected to generate 1.04 times more return on investment than UMA. However, Loopring is 1.04 times more volatile than UMA. It trades about 0.22 of its potential returns per unit of risk. UMA is currently generating about 0.13 per unit of risk. If you would invest  13.00  in Loopring on August 30, 2024 and sell it today you would earn a total of  11.00  from holding Loopring or generate 84.62% return on investment over 90 days.

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

Loopring  vs.  UMA

Loopring

Risk-Adjusted Performance

17 of 100

Solid

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

UMA

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Loopring and UMA

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

The idea behind Loopring and UMA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.