Correlation Between Lisk and Terra
Can any of the company-specific risk be diversified away by investing in both Lisk and Terra 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 Lisk and Terra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lisk and Terra, you can compare the effects of market volatilities on Lisk and Terra 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 Lisk with a short position of Terra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lisk and Terra.
Diversification Opportunities for Lisk and Terra
Very poor diversification
The 3 months correlation between Lisk and Terra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Lisk and Terra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terra and Lisk 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 Lisk are associated (or correlated) with Terra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terra has no effect on the direction of Lisk i.e., Lisk and Terra go up and down completely randomly.
Pair Corralation between Lisk and Terra
Assuming the 90 days trading horizon Lisk is expected to under-perform the Terra. But the crypto coin apears to be less risky and, when comparing its historical volatility, Lisk is 1.21 times less risky than Terra. The crypto coin trades about -0.01 of its potential returns per unit of risk. The Terra is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 64.00 in Terra on August 30, 2024 and sell it today you would lose (15.00) from holding Terra or give up 23.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lisk vs. Terra
Performance |
| Timeline |
| Lisk |
| Terra |
Lisk and Terra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lisk and Terra
The main advantage of trading using opposite Lisk and Terra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lisk position performs unexpectedly, Terra 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 Terra will offset losses from the drop in Terra's long position.The idea behind Lisk and Terra 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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