Correlation Between Decentraland and Injective

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

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

Diversification Opportunities for Decentraland and Injective

0.9

Correlation Coefficient

Decentraland  Injective

Almost no diversification

The 3 months correlation between Decentraland and Injective is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Decentraland and Injective in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Injective and Decentraland 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 Decentraland 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 Decentraland i.e., Decentraland and Injective go up and down completely randomly.

Pair Corralation between Decentraland and Injective

Assuming the 90 days trading horizon Decentraland is expected to generate 1.07 times more return on investment than Injective. However, Decentraland is 1.07 times more volatile than Injective. It trades about -0.01 of its potential returns per unit of risk. Injective is currently generating about -0.06 per unit of risk. If you would invest  40.00  in Decentraland on November 19, 2024 and sell it today you would lose (7.00) from holding Decentraland or give up 17.5% of portfolio value over 90 days.

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

Decentraland  vs.  Injective

Decentraland

Risk-Adjusted Performance

Very Weak

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

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 Decentraland and Injective

The main advantage of trading using opposite Decentraland and Injective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Decentraland 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 Decentraland 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.