Correlation Between Avalanche and Celestia

Can any of the company-specific risk be diversified away by investing in both Avalanche and Celestia 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 Avalanche and Celestia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avalanche and Celestia, you can compare the effects of market volatilities on Avalanche and Celestia 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 Avalanche with a short position of Celestia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and Celestia.

Diversification Opportunities for Avalanche and Celestia

0.07

Correlation Coefficient

Avalanche  Celestia

Significant diversification

The 3 months correlation between Avalanche and Celestia is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Celestia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celestia and Avalanche 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 Avalanche are associated (or correlated) with Celestia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celestia has no effect on the direction of Avalanche i.e., Avalanche and Celestia go up and down completely randomly.

Pair Corralation between Avalanche and Celestia

Assuming the 90 days trading horizon Avalanche is expected to under-perform the Celestia. But the crypto coin apears to be less risky and, when comparing its historical volatility, Avalanche is 1.4 times less risky than Celestia. The crypto coin trades about -0.28 of its potential returns per unit of risk. The Celestia is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,206  in Celestia on February 1, 2024 and sell it today you would lose (268.00) from holding Celestia or give up 22.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Avalanche  vs.  Celestia

Avalanche

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avalanche has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Avalanche is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Celestia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celestia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for Celestia shareholders.

Pair Trading with Avalanche and Celestia

The main advantage of trading using opposite Avalanche and Celestia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, Celestia 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 Celestia will offset losses from the drop in Celestia's long position.

The idea behind Avalanche and Celestia 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.