Correlation Between Wrapped Beacon and LEO Token

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

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

Diversification Opportunities for Wrapped Beacon and LEO Token

0.66

Correlation Coefficient

Wrapped Beacon  LEO Token

Poor diversification

The 3 months correlation between Wrapped and LEO is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Beacon ETH and LEO Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEO Token and Wrapped Beacon 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 Wrapped Beacon ETH are associated (or correlated) with LEO Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEO Token has no effect on the direction of Wrapped Beacon i.e., Wrapped Beacon and LEO Token go up and down completely randomly.

Pair Corralation between Wrapped Beacon and LEO Token

Assuming the 90 days trading horizon Wrapped Beacon ETH is expected to generate 3.2 times more return on investment than LEO Token. However, Wrapped Beacon is 3.2 times more volatile than LEO Token. It trades about -0.01 of its potential returns per unit of risk. LEO Token is currently generating about -0.08 per unit of risk. If you would invest  202,907  in Wrapped Beacon ETH on January 30, 2025 and sell it today you would lose (9,698) from holding Wrapped Beacon ETH or give up 4.78% of portfolio value over 90 days.

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

Wrapped Beacon ETH  vs.  LEO Token

Wrapped Beacon ETH

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wrapped Beacon ETH 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 Wrapped Beacon ETH shareholders.

LEO Token

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Wrapped Beacon and LEO Token

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

The idea behind Wrapped Beacon ETH and LEO Token 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.