Correlation Between LEO Token and CAPP

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Can any of the company-specific risk be diversified away by investing in both LEO Token and CAPP 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 CAPP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LEO Token and CAPP, you can compare the effects of market volatilities on LEO Token and CAPP 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 CAPP. Check out your portfolio center. Please also check ongoing floating volatility patterns of LEO Token and CAPP.

Diversification Opportunities for LEO Token and CAPP

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between LEO and CAPP is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding LEO Token and CAPP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPP 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 CAPP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPP has no effect on the direction of LEO Token i.e., LEO Token and CAPP go up and down completely randomly.

Pair Corralation between LEO Token and CAPP

Assuming the 90 days trading horizon LEO Token is expected to generate 18.81 times less return on investment than CAPP. But when comparing it to its historical volatility, LEO Token is 1.1 times less risky than CAPP. It trades about 0.01 of its potential returns per unit of risk. CAPP is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.01  in CAPP on April 30, 2025 and sell it today you would earn a total of  0.00  from holding CAPP or generate 25.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

LEO Token  vs.  CAPP

 Performance 
       Timeline  
LEO Token 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days LEO Token has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, LEO Token is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
CAPP 

Risk-Adjusted Performance

Good

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

LEO Token and CAPP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with LEO Token and CAPP

The main advantage of trading using opposite LEO Token and CAPP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LEO Token position performs unexpectedly, CAPP 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 CAPP will offset losses from the drop in CAPP's long position.
The idea behind LEO Token and CAPP 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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