Correlation Between LendingClub Corp and Coinbase Global

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

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

Diversification Opportunities for LendingClub Corp and Coinbase Global

0.9

Correlation Coefficient

LendingClub Corp  Coinbase Global

Almost no diversification

The 3 months correlation between LendingClub and Coinbase is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding LendingClub Corp and Coinbase Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Global and LendingClub Corp 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 LendingClub Corp are associated (or correlated) with Coinbase Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coinbase Global has no effect on the direction of LendingClub Corp i.e., LendingClub Corp and Coinbase Global go up and down completely randomly.

Pair Corralation between LendingClub Corp and Coinbase Global

Allowing for the 90-day total investment horizon LendingClub Corp is expected to generate 1.84 times less return on investment than Coinbase Global. But when comparing it to its historical volatility, LendingClub Corp is 2.16 times less risky than Coinbase Global. It trades about 0.19 of its potential returns per unit of risk. Coinbase Global is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,913  in Coinbase Global on September 1, 2024 and sell it today you would earn a total of  12,707  from holding Coinbase Global or generate 75.13% return on investment over 90 days.

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

LendingClub Corp  vs.  Coinbase Global

LendingClub Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LendingClub Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, LendingClub Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coinbase Global

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coinbase Global are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Coinbase Global displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LendingClub Corp and Coinbase Global

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

The idea behind LendingClub Corp and Coinbase Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.