Correlation Between LS 1x and VanEck Crypto

Can any of the company-specific risk be diversified away by investing in both LS 1x and VanEck Crypto 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 LS 1x and VanEck Crypto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LS 1x Amazon and VanEck Crypto Blockchain, you can compare the effects of market volatilities on LS 1x and VanEck Crypto 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 LS 1x with a short position of VanEck Crypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of LS 1x and VanEck Crypto.

Diversification Opportunities for LS 1x and VanEck Crypto

0.87

Correlation Coefficient

LS 1x  VanEck Crypto

Very poor diversification

The 3 months correlation between 1AMZ and VanEck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding LS 1x Amazon and VanEck Crypto Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Crypto Blockchain and LS 1x 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 LS 1x Amazon are associated (or correlated) with VanEck Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Crypto Blockchain has no effect on the direction of LS 1x i.e., LS 1x and VanEck Crypto go up and down completely randomly.

Pair Corralation between LS 1x and VanEck Crypto

Assuming the 90 days trading horizon LS 1x is expected to generate 2.88 times less return on investment than VanEck Crypto. But when comparing it to its historical volatility, LS 1x Amazon is 2.61 times less risky than VanEck Crypto. It trades about 0.2 of its potential returns per unit of risk. VanEck Crypto Blockchain is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  744.00  in VanEck Crypto Blockchain on September 13, 2024 and sell it today you would earn a total of  547.00  from holding VanEck Crypto Blockchain or generate 73.52% return on investment over 90 days.

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

LS 1x Amazon  vs.  VanEck Crypto Blockchain

LS 1x Amazon

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LS 1x Amazon are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, LS 1x unveiled solid returns over the last few months and may actually be approaching a breakup point.

VanEck Crypto Blockchain

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Crypto Blockchain are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, VanEck Crypto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LS 1x and VanEck Crypto

The main advantage of trading using opposite LS 1x and VanEck Crypto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LS 1x position performs unexpectedly, VanEck Crypto 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 VanEck Crypto will offset losses from the drop in VanEck Crypto's long position.

The idea behind LS 1x Amazon and VanEck Crypto Blockchain 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.