Correlation Between Litecoin and Decred

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

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

Diversification Opportunities for Litecoin and Decred

0.18

Correlation Coefficient

Litecoin  Decred

Average diversification

The 3 months correlation between Litecoin and Decred is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Litecoin and Decred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decred and Litecoin 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 Litecoin are associated (or correlated) with Decred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decred has no effect on the direction of Litecoin i.e., Litecoin and Decred go up and down completely randomly.

Pair Corralation between Litecoin and Decred

Assuming the 90 days trading horizon Litecoin is expected to generate 1.16 times less return on investment than Decred. In addition to that, Litecoin is 1.17 times more volatile than Decred. It trades about 0.1 of its total potential returns per unit of risk. Decred is currently generating about 0.14 per unit of volatility. If you would invest  1,075  in Decred on December 3, 2024 and sell it today you would earn a total of  127.00  from holding Decred or generate 11.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Litecoin  vs.  Decred

Litecoin

Risk-Adjusted Performance

Weak

Over the last 90 days Litecoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Litecoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Decred

Risk-Adjusted Performance

Very Weak

Over the last 90 days Decred 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Decred shareholders.

Pair Trading with Litecoin and Decred

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

The idea behind Litecoin and Decred 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.