Correlation Between Charles Schwab and Grayscale Litecoin

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

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

Diversification Opportunities for Charles Schwab and Grayscale Litecoin

0.65

Correlation Coefficient

Charles Schwab  Grayscale Litecoin

Poor diversification

The 3 months correlation between Charles and Grayscale is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Charles Schwab Corp and Grayscale Litecoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Litecoin Trust and Charles Schwab 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 Charles Schwab Corp are associated (or correlated) with Grayscale Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Litecoin Trust has no effect on the direction of Charles Schwab i.e., Charles Schwab and Grayscale Litecoin go up and down completely randomly.

Pair Corralation between Charles Schwab and Grayscale Litecoin

Given the investment horizon of 90 days Charles Schwab is expected to generate 2.84 times less return on investment than Grayscale Litecoin. But when comparing it to its historical volatility, Charles Schwab Corp is 4.81 times less risky than Grayscale Litecoin. It trades about 0.22 of its potential returns per unit of risk. Grayscale Litecoin Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,200  in Grayscale Litecoin Trust on September 15, 2024 and sell it today you would earn a total of  726.00  from holding Grayscale Litecoin Trust or generate 60.5% return on investment over 90 days.

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

Charles Schwab Corp  vs.  Grayscale Litecoin Trust

Charles Schwab Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Charles Schwab Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical indicators, Charles Schwab showed solid returns over the last few months and may actually be approaching a breakup point.

Grayscale Litecoin Trust

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Charles Schwab and Grayscale Litecoin

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

The idea behind Charles Schwab Corp and Grayscale Litecoin Trust 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.