Correlation Between Litecoin and STEEM
Can any of the company-specific risk be diversified away by investing in both Litecoin and STEEM 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 Litecoin and STEEM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Litecoin and STEEM, you can compare the effects of market volatilities on Litecoin and STEEM 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 Litecoin with a short position of STEEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Litecoin and STEEM.
Diversification Opportunities for Litecoin and STEEM
Very poor diversification
The 3 months correlation between Litecoin and STEEM is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Litecoin and STEEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEEM and Litecoin 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 Litecoin are associated (or correlated) with STEEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEEM has no effect on the direction of Litecoin i.e., Litecoin and STEEM go up and down completely randomly.
Pair Corralation between Litecoin and STEEM
Assuming the 90 days trading horizon Litecoin is expected to generate 2.42 times less return on investment than STEEM. But when comparing it to its historical volatility, Litecoin is 1.36 times less risky than STEEM. It trades about 0.04 of its potential returns per unit of risk. STEEM is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 17.00 in STEEM on August 31, 2024 and sell it today you would earn a total of 9.00 from holding STEEM or generate 52.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.42% |
| Values | Daily Returns |
Litecoin vs. STEEM
Performance |
| Timeline |
| Litecoin |
| STEEM |
Litecoin and STEEM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Litecoin and STEEM
The main advantage of trading using opposite Litecoin and STEEM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litecoin position performs unexpectedly, STEEM 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 STEEM will offset losses from the drop in STEEM's long position.The idea behind Litecoin and STEEM 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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