Correlation Between USDD and Litecoin

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

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

Diversification Opportunities for USDD and Litecoin

0.07

Correlation Coefficient

USDD  Litecoin

Significant diversification

The 3 months correlation between USDD and Litecoin is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding USDD and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin and USDD 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 USDD 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 USDD i.e., USDD and Litecoin go up and down completely randomly.

Pair Corralation between USDD and Litecoin

Assuming the 90 days trading horizon USDD is expected to generate 0.28 times more return on investment than Litecoin. However, USDD is 3.56 times less risky than Litecoin. It trades about -0.06 of its potential returns per unit of risk. Litecoin is currently generating about -0.05 per unit of risk. If you would invest  100.00  in USDD on January 3, 2025 and sell it today you would lose (7.00) from holding USDD or give up 7.0% of portfolio value over 90 days.

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

USDD  vs.  Litecoin

USDD

Risk-Adjusted Performance

Very Weak

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

Litecoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Litecoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for Litecoin shareholders.

Pair Trading with USDD and Litecoin

The main advantage of trading using opposite USDD and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if USDD 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 USDD 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.