Correlation Between Grayscale Zcash and Grayscale Litecoin

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

By analyzing existing cross correlation between Grayscale Zcash Trust and Grayscale Litecoin Trust, you can compare the effects of market volatilities on Grayscale Zcash and Grayscale Litecoin 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 Grayscale Zcash with a short position of Grayscale Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Zcash and Grayscale Litecoin.

Diversification Opportunities for Grayscale Zcash and Grayscale Litecoin

0.46

Correlation Coefficient

Grayscale Zcash  Grayscale Litecoin

Very weak diversification

The 3 months correlation between Grayscale and Grayscale is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Zcash Trust and Grayscale Litecoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Litecoin Trust and Grayscale Zcash 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 Grayscale Zcash Trust are associated (or correlated) with Grayscale Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Litecoin Trust has no effect on the direction of Grayscale Zcash i.e., Grayscale Zcash and Grayscale Litecoin go up and down completely randomly.

Pair Corralation between Grayscale Zcash and Grayscale Litecoin

Given the investment horizon of 90 days Grayscale Zcash Trust is expected to under-perform the Grayscale Litecoin. But the otc stock apears to be less risky and, when comparing its historical volatility, Grayscale Zcash Trust is 1.15 times less risky than Grayscale Litecoin. The otc stock trades about -0.18 of its potential returns per unit of risk. The Grayscale Litecoin Trust is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,511  in Grayscale Litecoin Trust on December 21, 2024 and sell it today you would lose (690.00) from holding Grayscale Litecoin Trust or give up 45.67% of portfolio value over 90 days.

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

Grayscale Zcash Trust  vs.  Grayscale Litecoin Trust

Grayscale Zcash Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Zcash Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Grayscale Litecoin Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Litecoin Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Grayscale Zcash and Grayscale Litecoin

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

The idea behind Grayscale Zcash Trust and Grayscale Litecoin Trust 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.