Correlation Between Algorand and Litecoin
Can any of the company-specific risk be diversified away by investing in both Algorand and Litecoin 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 Algorand and Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algorand and Litecoin, you can compare the effects of market volatilities on Algorand and Litecoin 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 Algorand with a short position of Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algorand and Litecoin.
Diversification Opportunities for Algorand and Litecoin
Poor diversification
The 3 months correlation between Algorand and Litecoin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Algorand and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin and Algorand 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 Algorand are associated (or correlated) with Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litecoin has no effect on the direction of Algorand i.e., Algorand and Litecoin go up and down completely randomly.
Pair Corralation between Algorand and Litecoin
Assuming the 90 days trading horizon Algorand is expected to generate 1.27 times more return on investment than Litecoin. However, Algorand is 1.27 times more volatile than Litecoin. It trades about -0.16 of its potential returns per unit of risk. Litecoin is currently generating about -0.27 per unit of risk. If you would invest 23.00 in Algorand on February 1, 2024 and sell it today you would lose (5.00) from holding Algorand or give up 21.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algorand vs. Litecoin
Performance |
| Timeline |
| Algorand |
| Litecoin |
Algorand and Litecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algorand and Litecoin
The main advantage of trading using opposite Algorand and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algorand position performs unexpectedly, Litecoin 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 Litecoin will offset losses from the drop in Litecoin's long position.The idea behind Algorand and Litecoin 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |