Correlation Between Value Line and Coinbase Global

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

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

Diversification Opportunities for Value Line and Coinbase Global

0.8

Correlation Coefficient

Value Line  Coinbase Global

Very poor diversification

The 3 months correlation between Value and Coinbase is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Value Line and Coinbase Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Global and Value Line 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 Value Line 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 Value Line i.e., Value Line and Coinbase Global go up and down completely randomly.

Pair Corralation between Value Line and Coinbase Global

Given the investment horizon of 90 days Value Line is expected to generate 2.8 times less return on investment than Coinbase Global. But when comparing it to its historical volatility, Value Line is 2.08 times less risky than Coinbase Global. It trades about 0.12 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	Strong
Accuracy	100.0%
Values	Daily Returns

Value Line  vs.  Coinbase Global

Value Line

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Line are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Value Line unveiled 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 Value Line and Coinbase Global

The main advantage of trading using opposite Value Line and Coinbase Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Line 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 Value Line 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.