Correlation Between API3 and Loopring

Can any of the company-specific risk be diversified away by investing in both API3 and Loopring 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 API3 and Loopring into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between API3 and Loopring, you can compare the effects of market volatilities on API3 and Loopring 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 API3 with a short position of Loopring. Check out your portfolio center. Please also check ongoing floating volatility patterns of API3 and Loopring.

Diversification Opportunities for API3 and Loopring

0.89

Correlation Coefficient

API3  Loopring

Very poor diversification

The 3 months correlation between API3 and Loopring is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding API3 and Loopring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loopring and API3 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 API3 are associated (or correlated) with Loopring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loopring has no effect on the direction of API3 i.e., API3 and Loopring go up and down completely randomly.

Pair Corralation between API3 and Loopring

Assuming the 90 days trading horizon API3 is expected to generate 1.27 times less return on investment than Loopring. In addition to that, API3 is 1.17 times more volatile than Loopring. It trades about 0.17 of its total potential returns per unit of risk. Loopring is currently generating about 0.26 per unit of volatility. If you would invest  12.00  in Loopring on September 2, 2024 and sell it today you would earn a total of  13.00  from holding Loopring or generate 108.33% return on investment over 90 days.

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

API3  vs.  Loopring

API3

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in API3 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, API3 exhibited solid returns over the last few months and may actually be approaching a breakup point.

Loopring

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Loopring are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Loopring exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with API3 and Loopring

The main advantage of trading using opposite API3 and Loopring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if API3 position performs unexpectedly, Loopring 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 Loopring will offset losses from the drop in Loopring's long position.

The idea behind API3 and Loopring 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.