Correlation Between Maker and Lido DAO

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

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

Diversification Opportunities for Maker and Lido DAO

-0.03

Correlation Coefficient

Maker  Lido DAO

Good diversification

The 3 months correlation between Maker and Lido is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Maker and Lido DAO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lido DAO and Maker 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 Maker are associated (or correlated) with Lido DAO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lido DAO has no effect on the direction of Maker i.e., Maker and Lido DAO go up and down completely randomly.

Pair Corralation between Maker and Lido DAO

Assuming the 90 days trading horizon Maker is expected to generate 0.84 times more return on investment than Lido DAO. However, Maker is 1.19 times less risky than Lido DAO. It trades about 0.0 of its potential returns per unit of risk. Lido DAO is currently generating about -0.11 per unit of risk. If you would invest  149,147  in Maker on December 30, 2024 and sell it today you would lose (20,078) from holding Maker or give up 13.46% of portfolio value over 90 days.

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

Maker  vs.  Lido DAO

Maker

Risk-Adjusted Performance

Very Weak

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

Lido DAO

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lido DAO 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 Lido DAO shareholders.

Pair Trading with Maker and Lido DAO

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

The idea behind Maker and Lido DAO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.