Correlation Between 0x and Stacks

Can any of the company-specific risk be diversified away by investing in both 0x and Stacks 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 0x and Stacks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 0x and Stacks, you can compare the effects of market volatilities on 0x and Stacks 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 0x with a short position of Stacks. Check out your portfolio center. Please also check ongoing floating volatility patterns of 0x and Stacks.

Diversification Opportunities for 0x and Stacks

0.99

Correlation Coefficient

0x  Stacks

No risk reduction

The 3 months correlation between 0x and Stacks is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding 0x and Stacks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stacks and 0x 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 0x are associated (or correlated) with Stacks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stacks has no effect on the direction of 0x i.e., 0x and Stacks go up and down completely randomly.

Pair Corralation between 0x and Stacks

Assuming the 90 days trading horizon 0x is expected to generate 0.9 times more return on investment than Stacks. However, 0x is 1.11 times less risky than Stacks. It trades about -0.14 of its potential returns per unit of risk. Stacks is currently generating about -0.17 per unit of risk. If you would invest  46.00  in 0x on December 28, 2024 and sell it today you would lose (20.00) from holding 0x or give up 43.48% of portfolio value over 90 days.

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

0x  vs.  Stacks

0x

Risk-Adjusted Performance

Very Weak

Over the last 90 days 0x 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for 0x shareholders.

Stacks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stacks 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for Stacks shareholders.

Pair Trading with 0x and Stacks

The main advantage of trading using opposite 0x and Stacks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 0x position performs unexpectedly, Stacks 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 Stacks will offset losses from the drop in Stacks' long position.

The idea behind 0x and Stacks 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.