Correlation Between DGB and Wormhole

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

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

Diversification Opportunities for DGB and Wormhole

0.01

Correlation Coefficient

DGB  Wormhole

Significant diversification

The 3 months correlation between DGB and Wormhole is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding DGB and Wormhole in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wormhole and DGB 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 DGB are associated (or correlated) with Wormhole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wormhole has no effect on the direction of DGB i.e., DGB and Wormhole go up and down completely randomly.

Pair Corralation between DGB and Wormhole

Assuming the 90 days trading horizon DGB is expected to generate 1.01 times more return on investment than Wormhole. However, DGB is 1.01 times more volatile than Wormhole. It trades about 0.12 of its potential returns per unit of risk. Wormhole is currently generating about -0.02 per unit of risk. If you would invest  0.79  in DGB on August 23, 2024 and sell it today you would earn a total of  0.33  from holding DGB or generate 41.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

DGB  vs.  Wormhole

DGB

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DGB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, DGB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wormhole

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wormhole has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Wormhole shareholders.

Pair Trading with DGB and Wormhole

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

The idea behind DGB and Wormhole 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.