Correlation Between LEO Token and BCD

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

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

Diversification Opportunities for LEO Token and BCD

0.81

Correlation Coefficient

LEO Token  BCD

Very poor diversification

The 3 months correlation between LEO and BCD is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding LEO Token and BCD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCD and LEO Token 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 LEO Token are associated (or correlated) with BCD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCD has no effect on the direction of LEO Token i.e., LEO Token and BCD go up and down completely randomly.

Pair Corralation between LEO Token and BCD

Assuming the 90 days trading horizon LEO Token is expected to generate 0.34 times more return on investment than BCD. However, LEO Token is 2.97 times less risky than BCD. It trades about -0.11 of its potential returns per unit of risk. BCD is currently generating about -0.22 per unit of risk. If you would invest  610.00  in LEO Token on January 27, 2024 and sell it today you would lose (33.00) from holding LEO Token or give up 5.41% of portfolio value over 90 days.

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

LEO Token  vs.  BCD

LEO Token

Risk-Adjusted Performance

18 of 100

Solid

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

BCD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BCD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, BCD exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LEO Token and BCD

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

The idea behind LEO Token and BCD 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.