Correlation Between LayerZero and LCX
Can any of the company-specific risk be diversified away by investing in both LayerZero and LCX 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 LayerZero and LCX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between LayerZero and LCX, you can compare the effects of market volatilities on LayerZero and LCX 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 LayerZero with a short position of LCX. Check out your portfolio center. Please also check ongoing floating volatility patterns of LayerZero and LCX.
Diversification Opportunities for LayerZero and LCX
Very good diversification
The 3 months correlation between LayerZero and LCX is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding LayerZero and LCX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCX and LayerZero 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 LayerZero are associated (or correlated) with LCX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCX has no effect on the direction of LayerZero i.e., LayerZero and LCX go up and down completely randomly.
Pair Corralation between LayerZero and LCX
Assuming the 90 days trading horizon LayerZero is expected to generate 4.2 times less return on investment than LCX. But when comparing it to its historical volatility, LayerZero is 3.11 times less risky than LCX. It trades about 0.28 of its potential returns per unit of risk. LCX is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 10.00 in LCX on August 30, 2024 and sell it today you would earn a total of 23.00 from holding LCX or generate 230.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
LayerZero vs. LCX
Performance |
| Timeline |
| LayerZero |
| LCX |
LayerZero and LCX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with LayerZero and LCX
The main advantage of trading using opposite LayerZero and LCX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LayerZero position performs unexpectedly, LCX 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 LCX will offset losses from the drop in LCX's long position.The idea behind LayerZero and LCX 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |