Correlation Between Stellar and Pendle

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

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

Diversification Opportunities for Stellar and Pendle

0.54

Correlation Coefficient

Stellar  Pendle

Very weak diversification

The 3 months correlation between Stellar and Pendle is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Pendle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pendle and Stellar 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 Stellar are associated (or correlated) with Pendle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pendle has no effect on the direction of Stellar i.e., Stellar and Pendle go up and down completely randomly.

Pair Corralation between Stellar and Pendle

Assuming the 90 days trading horizon Stellar is expected to generate 1.73 times more return on investment than Pendle. However, Stellar is 1.73 times more volatile than Pendle. It trades about 0.3 of its potential returns per unit of risk. Pendle is currently generating about 0.2 per unit of risk. If you would invest  9.15  in Stellar on September 2, 2024 and sell it today you would earn a total of  43.85  from holding Stellar or generate 479.23% return on investment over 90 days.

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

Stellar  vs.  Pendle

Stellar

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 23 (%) 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.

Pendle

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pendle are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Pendle sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and Pendle

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

The idea behind Stellar and Pendle 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.