Correlation Between Celestia and DYdX

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

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

Diversification Opportunities for Celestia and DYdX

0.76

Correlation Coefficient

Celestia  DYdX

Poor diversification

The 3 months correlation between Celestia and DYdX is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Celestia and dYdX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on dYdX and Celestia 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 Celestia are associated (or correlated) with DYdX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of dYdX has no effect on the direction of Celestia i.e., Celestia and DYdX go up and down completely randomly.

Pair Corralation between Celestia and DYdX

Assuming the 90 days trading horizon Celestia is expected to generate 1.16 times more return on investment than DYdX. However, Celestia is 1.16 times more volatile than dYdX. It trades about 0.19 of its potential returns per unit of risk. dYdX is currently generating about 0.2 per unit of risk. If you would invest  405.00  in Celestia on September 2, 2024 and sell it today you would earn a total of  432.00  from holding Celestia or generate 106.67% return on investment over 90 days.

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

Celestia  vs.  dYdX

Celestia

Risk-Adjusted Performance

15 of 100

Good

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

dYdX

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in dYdX are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, DYdX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Celestia and DYdX

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

The idea behind Celestia and dYdX 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.