Correlation Between Stellar and OAX

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

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

Diversification Opportunities for Stellar and OAX

0.69

Correlation Coefficient

Stellar  OAX

Poor diversification

The 3 months correlation between Stellar and OAX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and OAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAX 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 OAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAX has no effect on the direction of Stellar i.e., Stellar and OAX go up and down completely randomly.

Pair Corralation between Stellar and OAX

Assuming the 90 days trading horizon Stellar is expected to under-perform the OAX. But the crypto coin apears to be less risky and, when comparing its historical volatility, Stellar is 3.24 times less risky than OAX. The crypto coin trades about -0.02 of its potential returns per unit of risk. The OAX is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.11  in OAX on December 29, 2024 and sell it today you would lose (2.12) from holding OAX or give up 51.58% of portfolio value over 90 days.

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

Stellar  vs.  OAX

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.

OAX

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in OAX are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, OAX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and OAX

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

The idea behind Stellar and OAX 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.