Correlation Between LEO Token and CREAM

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

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

Diversification Opportunities for LEO Token and CREAM

-0.48

Correlation Coefficient

LEO Token  CREAM

Very good diversification

The 3 months correlation between LEO and CREAM is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LEO Token and CREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREAM and LEO Token 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 LEO Token are associated (or correlated) with CREAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREAM has no effect on the direction of LEO Token i.e., LEO Token and CREAM go up and down completely randomly.

Pair Corralation between LEO Token and CREAM

Assuming the 90 days trading horizon LEO Token is expected to generate 1.85 times less return on investment than CREAM. But when comparing it to its historical volatility, LEO Token is 8.23 times less risky than CREAM. It trades about 0.25 of its potential returns per unit of risk. CREAM is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,847  in CREAM on September 1, 2024 and sell it today you would lose (776.00) from holding CREAM or give up 42.01% of portfolio value over 90 days.

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

LEO Token  vs.  CREAM

LEO Token

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LEO Token are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LEO Token exhibited solid returns over the last few months and may actually be approaching a breakup point.

CREAM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CREAM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CREAM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LEO Token and CREAM

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

The idea behind LEO Token and CREAM 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.