Correlation Between Litecoin and Injective

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

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

Diversification Opportunities for Litecoin and Injective

0.11

Correlation Coefficient

Litecoin  Injective

Average diversification

The 3 months correlation between Litecoin and Injective is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Litecoin and Injective in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Injective 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 Injective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Injective has no effect on the direction of Litecoin i.e., Litecoin and Injective go up and down completely randomly.

Pair Corralation between Litecoin and Injective

Assuming the 90 days trading horizon Litecoin is expected to generate 1.08 times more return on investment than Injective. However, Litecoin is 1.08 times more volatile than Injective. It trades about 0.14 of its potential returns per unit of risk. Injective is currently generating about -0.06 per unit of risk. If you would invest  8,347  in Litecoin on November 19, 2024 and sell it today you would earn a total of  5,037  from holding Litecoin or generate 60.35% return on investment over 90 days.

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

Litecoin  vs.  Injective

Litecoin

Risk-Adjusted Performance

OK

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

Injective

Risk-Adjusted Performance

Very Weak

Over the last 90 days Injective 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 forward-looking 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 Injective shareholders.

Pair Trading with Litecoin and Injective

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

The idea behind Litecoin and Injective 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.