Correlation Between Raydium and Decentraland

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

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

Diversification Opportunities for Raydium and Decentraland

0.26

Correlation Coefficient

Raydium  Decentraland

Modest diversification

The 3 months correlation between Raydium and Decentraland is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Raydium and Decentraland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentraland and Raydium 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 Raydium are associated (or correlated) with Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentraland has no effect on the direction of Raydium i.e., Raydium and Decentraland go up and down completely randomly.

Pair Corralation between Raydium and Decentraland

Assuming the 90 days trading horizon Raydium is expected to generate 1.43 times more return on investment than Decentraland. However, Raydium is 1.43 times more volatile than Decentraland. It trades about -0.08 of its potential returns per unit of risk. Decentraland is currently generating about -0.17 per unit of risk. If you would invest  527.00  in Raydium on December 1, 2024 and sell it today you would lose (289.00) from holding Raydium or give up 54.84% of portfolio value over 90 days.

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

Raydium  vs.  Decentraland

Raydium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Raydium 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 Raydium shareholders.

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 unsteady performance in the last few months, the Crypto's fundamental 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 Decentraland shareholders.

Pair Trading with Raydium and Decentraland

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

The idea behind Raydium and Decentraland 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.