Correlation Between Tezos and Lisk

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

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

Diversification Opportunities for Tezos and Lisk

0.92

Correlation Coefficient

Tezos  Lisk

Almost no diversification

The 3 months correlation between Tezos and Lisk is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Tezos and Lisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisk and Tezos 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 Tezos are associated (or correlated) with Lisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisk has no effect on the direction of Tezos i.e., Tezos and Lisk go up and down completely randomly.

Pair Corralation between Tezos and Lisk

Assuming the 90 days trading horizon Tezos is expected to generate 1.19 times more return on investment than Lisk. However, Tezos is 1.19 times more volatile than Lisk. It trades about 0.52 of its potential returns per unit of risk. Lisk is currently generating about 0.4 per unit of risk. If you would invest  66.00  in Tezos on August 30, 2024 and sell it today you would earn a total of  61.00  from holding Tezos or generate 92.42% return on investment over 90 days.

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

Tezos  vs.  Lisk

Tezos

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tezos are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Tezos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lisk

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Tezos and Lisk

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

The idea behind Tezos and Lisk 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.