Correlation Between Stellar and SOUL

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

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

Diversification Opportunities for Stellar and SOUL

0.78

Correlation Coefficient

Stellar  SOUL

Poor diversification

The 3 months correlation between Stellar and SOUL is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and SOUL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUL 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 SOUL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUL has no effect on the direction of Stellar i.e., Stellar and SOUL go up and down completely randomly.

Pair Corralation between Stellar and SOUL

Assuming the 90 days trading horizon Stellar is expected to generate 0.58 times more return on investment than SOUL. However, Stellar is 1.72 times less risky than SOUL. It trades about 0.29 of its potential returns per unit of risk. SOUL is currently generating about 0.16 per unit of risk. 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	Significant
Accuracy	100.0%
Values	Daily Returns

Stellar  vs.  SOUL

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.

SOUL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SOUL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SOUL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stellar and SOUL

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

The idea behind Stellar and SOUL 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.