Correlation Between TRON and LEMO

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

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

Diversification Opportunities for TRON and LEMO

-0.68

Correlation Coefficient

TRON  LEMO

Excellent diversification

The 3 months correlation between TRON and LEMO is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding TRON and LEMO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEMO and TRON 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 TRON are associated (or correlated) with LEMO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEMO has no effect on the direction of TRON i.e., TRON and LEMO go up and down completely randomly.

Pair Corralation between TRON and LEMO

Assuming the 90 days trading horizon TRON is expected to generate 0.6 times more return on investment than LEMO. However, TRON is 1.67 times less risky than LEMO. It trades about 0.17 of its potential returns per unit of risk. LEMO is currently generating about -0.02 per unit of risk. If you would invest  15.00  in TRON on September 3, 2024 and sell it today you would earn a total of  7.00  from holding TRON or generate 46.67% return on investment over 90 days.

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

TRON  vs.  LEMO

TRON

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

LEMO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LEMO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for LEMO shareholders.

Pair Trading with TRON and LEMO

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

The idea behind TRON and LEMO 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.