Correlation Between Cosmos and Decentraland
Can any of the company-specific risk be diversified away by investing in both Cosmos and Decentraland 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 Cosmos and Decentraland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and Decentraland, you can compare the effects of market volatilities on Cosmos and Decentraland 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 Cosmos with a short position of Decentraland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Decentraland.
Diversification Opportunities for Cosmos and Decentraland
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cosmos and Decentraland is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Decentraland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentraland and Cosmos 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 Cosmos are associated (or correlated) with Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentraland has no effect on the direction of Cosmos i.e., Cosmos and Decentraland go up and down completely randomly.
Pair Corralation between Cosmos and Decentraland
Assuming the 90 days trading horizon Cosmos is expected to generate 2.06 times less return on investment than Decentraland. But when comparing it to its historical volatility, Cosmos is 1.17 times less risky than Decentraland. It trades about 0.04 of its potential returns per unit of risk. Decentraland is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 31.00 in Decentraland on January 24, 2024 and sell it today you would earn a total of 17.00 from holding Decentraland or generate 54.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosmos vs. Decentraland
Performance |
| Timeline |
| Cosmos |
| Decentraland |
Cosmos and Decentraland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosmos and Decentraland
The main advantage of trading using opposite Cosmos and Decentraland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Decentraland 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 Decentraland will offset losses from the drop in Decentraland's long position.The idea behind Cosmos and Decentraland 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.| Decentraland vs. Solana | Decentraland vs. XRP | Decentraland vs. The Open Network | Decentraland vs. Staked Ether |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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