Correlation Between ETN and Litecoin
Can any of the company-specific risk be diversified away by investing in both ETN 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 ETN and Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETN and Litecoin, you can compare the effects of market volatilities on ETN 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 ETN with a short position of Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETN and Litecoin.
Diversification Opportunities for ETN and Litecoin
Poor diversification
The 3 months correlation between ETN and Litecoin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding ETN and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin and ETN 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 ETN 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 ETN i.e., ETN and Litecoin go up and down completely randomly.
Pair Corralation between ETN and Litecoin
Assuming the 90 days trading horizon ETN is expected to generate 1.2 times less return on investment than Litecoin. In addition to that, ETN is 2.22 times more volatile than Litecoin. It trades about 0.02 of its total potential returns per unit of risk. Litecoin is currently generating about 0.04 per unit of volatility. If you would invest 10,225 in Litecoin on November 9, 2024 and sell it today you would earn a total of 173.00 from holding Litecoin or generate 1.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETN vs. Litecoin
Performance |
| Timeline |
| ETN |
| Litecoin |
ETN and Litecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETN and Litecoin
The main advantage of trading using opposite ETN and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETN 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 ETN 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.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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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