Correlation Between Stellar and Graph

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

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

Diversification Opportunities for Stellar and Graph

0.58

Correlation Coefficient

Stellar  Graph

Very weak diversification

The 3 months correlation between Stellar and Graph is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and The Graph in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graph 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 Graph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graph has no effect on the direction of Stellar i.e., Stellar and Graph go up and down completely randomly.

Pair Corralation between Stellar and Graph

Assuming the 90 days trading horizon Stellar is expected to generate 1.44 times more return on investment than Graph. However, Stellar is 1.44 times more volatile than The Graph. It trades about 0.1 of its potential returns per unit of risk. The Graph is currently generating about -0.06 per unit of risk. If you would invest  25.00  in Stellar on November 19, 2024 and sell it today you would earn a total of  10.00  from holding Stellar or generate 40.0% return on investment over 90 days.

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

Stellar  vs.  The Graph

Stellar

Risk-Adjusted Performance

OK

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

Graph

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Graph 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 The Graph shareholders.

Pair Trading with Stellar and Graph

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

The idea behind Stellar and The Graph 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.