Correlation Between Stellar and Grayscale Stellar

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

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

Diversification Opportunities for Stellar and Grayscale Stellar

0.94

Correlation Coefficient

Stellar  Grayscale Stellar

Almost no diversification

The 3 months correlation between Stellar and Grayscale is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Grayscale Stellar Lumens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Stellar Lumens 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 Grayscale Stellar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Stellar Lumens has no effect on the direction of Stellar i.e., Stellar and Grayscale Stellar go up and down completely randomly.

Pair Corralation between Stellar and Grayscale Stellar

Assuming the 90 days trading horizon Stellar is expected to generate 0.87 times more return on investment than Grayscale Stellar. However, Stellar is 1.15 times less risky than Grayscale Stellar. It trades about 0.01 of its potential returns per unit of risk. Grayscale Stellar Lumens is currently generating about -0.01 per unit of risk. If you would invest  44.00  in Stellar on October 10, 2024 and sell it today you would lose (2.00) from holding Stellar or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Stellar  vs.  Grayscale Stellar Lumens

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) 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.

Grayscale Stellar Lumens

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Stellar Lumens are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent essential indicators, Grayscale Stellar displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and Grayscale Stellar

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

The idea behind Stellar and Grayscale Stellar Lumens 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.