Correlation Between Stellar and Exchange Bank

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

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

Diversification Opportunities for Stellar and Exchange Bank

-0.4

Correlation Coefficient

Stellar  Exchange Bank

Very good diversification

The 3 months correlation between Stellar and Exchange is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank 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 Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of Stellar i.e., Stellar and Exchange Bank go up and down completely randomly.

Pair Corralation between Stellar and Exchange Bank

Assuming the 90 days trading horizon Stellar is expected to under-perform the Exchange Bank. In addition to that, Stellar is 1.88 times more volatile than Exchange Bank. It trades about -0.06 of its total potential returns per unit of risk. Exchange Bank is currently generating about 0.01 per unit of volatility. If you would invest  10,870  in Exchange Bank on December 22, 2024 and sell it today you would lose (170.00) from holding Exchange Bank or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Stellar  vs.  Exchange Bank

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 unsteady performance in the last few months, the Crypto's primary 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 Stellar shareholders.

Exchange Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exchange Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Exchange Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Stellar and Exchange Bank

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

The idea behind Stellar and Exchange Bank 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..