Correlation Between XDN and Decred
Can any of the company-specific risk be diversified away by investing in both XDN and Decred 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 XDN and Decred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XDN and Decred, you can compare the effects of market volatilities on XDN and Decred 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 XDN with a short position of Decred. Check out your portfolio center. Please also check ongoing floating volatility patterns of XDN and Decred.
Diversification Opportunities for XDN and Decred
Poor diversification
The 3 months correlation between XDN and Decred is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding XDN and Decred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decred and XDN 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 XDN are associated (or correlated) with Decred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decred has no effect on the direction of XDN i.e., XDN and Decred go up and down completely randomly.
Pair Corralation between XDN and Decred
Assuming the 90 days trading horizon XDN is expected to generate 3.99 times more return on investment than Decred. However, XDN is 3.99 times more volatile than Decred. It trades about 0.08 of its potential returns per unit of risk. Decred is currently generating about 0.0 per unit of risk. If you would invest 0.01 in XDN on August 27, 2024 and sell it today you would lose 0.00 from holding XDN or give up 47.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
XDN vs. Decred
Performance |
| Timeline |
| XDN |
| Decred |
XDN and Decred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XDN and Decred
The main advantage of trading using opposite XDN and Decred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XDN position performs unexpectedly, Decred 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 Decred will offset losses from the drop in Decred's long position.The idea behind XDN and Decred 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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