Correlation Between TRON and Stellar

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

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

Diversification Opportunities for TRON and Stellar

0.8

Correlation Coefficient

TRON  Stellar

Very poor diversification

The 3 months correlation between TRON and Stellar is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TRON and Stellar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellar and TRON 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 TRON are associated (or correlated) with Stellar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellar has no effect on the direction of TRON i.e., TRON and Stellar go up and down completely randomly.

Pair Corralation between TRON and Stellar

Assuming the 90 days trading horizon TRON is expected to generate 7.29 times less return on investment than Stellar. But when comparing it to its historical volatility, TRON is 2.76 times less risky than Stellar. It trades about 0.11 of its potential returns per unit of risk. Stellar is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  9.25  in Stellar on August 30, 2024 and sell it today you would earn a total of  38.75  from holding Stellar or generate 418.92% return on investment over 90 days.

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

TRON  vs.  Stellar

TRON

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TRON are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, TRON exhibited solid returns over the last few months and may actually be approaching a breakup point.

Stellar

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TRON and Stellar

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

The idea behind TRON and Stellar 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.