Correlation Between LSK and TRON

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

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

Diversification Opportunities for LSK and TRON

0.78

Correlation Coefficient

LSK  TRON

Poor diversification

The 3 months correlation between LSK and TRON is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding LSK and TRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRON and LSK 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 LSK are associated (or correlated) with TRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRON has no effect on the direction of LSK i.e., LSK and TRON go up and down completely randomly.

Pair Corralation between LSK and TRON

Assuming the 90 days trading horizon LSK is expected to generate 2.55 times less return on investment than TRON. But when comparing it to its historical volatility, LSK is 1.11 times less risky than TRON. It trades about 0.04 of its potential returns per unit of risk. TRON is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  5.37  in TRON on September 25, 2024 and sell it today you would earn a total of  19.63  from holding TRON or generate 365.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.67%
Values	Daily Returns

LSK  vs.  TRON

LSK

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LSK are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, LSK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

TRON

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LSK and TRON

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

The idea behind LSK and TRON 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.