Correlation Between RocketPool and Tezos

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

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

Diversification Opportunities for RocketPool and Tezos

0.94

Correlation Coefficient

RocketPool  Tezos

Almost no diversification

The 3 months correlation between RocketPool and Tezos is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding RocketPool and Tezos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tezos and RocketPool 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 RocketPool are associated (or correlated) with Tezos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tezos has no effect on the direction of RocketPool i.e., RocketPool and Tezos go up and down completely randomly.

Pair Corralation between RocketPool and Tezos

Assuming the 90 days trading horizon RocketPool is expected to under-perform the Tezos. In addition to that, RocketPool is 1.47 times more volatile than Tezos. It trades about -0.09 of its total potential returns per unit of risk. Tezos is currently generating about -0.11 per unit of volatility. If you would invest  137.00  in Tezos on November 28, 2024 and sell it today you would lose (59.00) from holding Tezos or give up 43.07% of portfolio value over 90 days.

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

RocketPool  vs.  Tezos

RocketPool

Risk-Adjusted Performance

Very Weak

Over the last 90 days RocketPool 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 essential 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 RocketPool shareholders.

Tezos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tezos 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for Tezos shareholders.

Pair Trading with RocketPool and Tezos

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

The idea behind RocketPool and Tezos 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..