Correlation Between Stellar and LTO

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

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

Diversification Opportunities for Stellar and LTO

0.74

Correlation Coefficient

Stellar  LTO

Poor diversification

The 3 months correlation between Stellar and LTO is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and LTO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LTO 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 LTO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LTO has no effect on the direction of Stellar i.e., Stellar and LTO go up and down completely randomly.

Pair Corralation between Stellar and LTO

Assuming the 90 days trading horizon Stellar is expected to generate 0.95 times more return on investment than LTO. However, Stellar is 1.06 times less risky than LTO. It trades about -0.12 of its potential returns per unit of risk. LTO is currently generating about -0.18 per unit of risk. If you would invest  55.00  in Stellar on November 28, 2024 and sell it today you would lose (26.00) from holding Stellar or give up 47.27% of portfolio value over 90 days.

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

Stellar  vs.  LTO

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 March 2025. The latest tumult may also be a sign of longer-term up-swing for Stellar shareholders.

LTO

Risk-Adjusted Performance

Very Weak

Over the last 90 days LTO 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 LTO shareholders.

Pair Trading with Stellar and LTO

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

The idea behind Stellar and LTO 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 Commodity Directory module to find actively traded commodities issued by global exchanges.