Correlation Between Stellar and BEL

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

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

Diversification Opportunities for Stellar and BEL

-0.5

Correlation Coefficient

Stellar  BEL

Very good diversification

The 3 months correlation between Stellar and BEL is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and BEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BEL and Stellar 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 Stellar are associated (or correlated) with BEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BEL has no effect on the direction of Stellar i.e., Stellar and BEL go up and down completely randomly.

Pair Corralation between Stellar and BEL

Assuming the 90 days trading horizon Stellar is expected to under-perform the BEL. But the crypto coin apears to be less risky and, when comparing its historical volatility, Stellar is 1.2 times less risky than BEL. The crypto coin trades about -0.02 of its potential returns per unit of risk. The BEL is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  56.00  in BEL on December 29, 2024 and sell it today you would earn a total of  17.00  from holding BEL or generate 30.36% return on investment over 90 days.

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

Stellar  vs.  BEL

Stellar

Risk-Adjusted Performance

Very Weak

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

BEL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BEL are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, BEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and BEL

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

The idea behind Stellar and BEL 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.