Correlation Between XPLA and LayerZero

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

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

Diversification Opportunities for XPLA and LayerZero

0.72

Correlation Coefficient

XPLA  LayerZero

Poor diversification

The 3 months correlation between XPLA and LayerZero is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding XPLA and LayerZero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LayerZero and XPLA 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 XPLA are associated (or correlated) with LayerZero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LayerZero has no effect on the direction of XPLA i.e., XPLA and LayerZero go up and down completely randomly.

Pair Corralation between XPLA and LayerZero

Assuming the 90 days trading horizon XPLA is expected to generate 3.46 times less return on investment than LayerZero. But when comparing it to its historical volatility, XPLA is 1.74 times less risky than LayerZero. It trades about 0.09 of its potential returns per unit of risk. LayerZero is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  334.00  in LayerZero on September 3, 2024 and sell it today you would earn a total of  275.00  from holding LayerZero or generate 82.34% return on investment over 90 days.

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

XPLA  vs.  LayerZero

XPLA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XPLA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, XPLA exhibited solid returns over the last few months and may actually be approaching a breakup point.

LayerZero

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LayerZero are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LayerZero exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XPLA and LayerZero

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

The idea behind XPLA and LayerZero 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.