Correlation Between Compound Governance and LEO Token

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

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

Diversification Opportunities for Compound Governance and LEO Token

0.53

Correlation Coefficient

Compound Governance  LEO Token

Very weak diversification

The 3 months correlation between Compound and LEO is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and LEO Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LEO Token and Compound Governance 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 Compound Governance Token are associated (or correlated) with LEO Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LEO Token has no effect on the direction of Compound Governance i.e., Compound Governance and LEO Token go up and down completely randomly.

Pair Corralation between Compound Governance and LEO Token

Assuming the 90 days trading horizon Compound Governance Token is expected to under-perform the LEO Token. In addition to that, Compound Governance is 2.9 times more volatile than LEO Token. It trades about -0.23 of its total potential returns per unit of risk. LEO Token is currently generating about -0.09 per unit of volatility. If you would invest  619.00  in LEO Token on January 19, 2024 and sell it today you would lose (27.00) from holding LEO Token or give up 4.36% of portfolio value over 90 days.

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

Compound Governance Token  vs.  LEO Token

Compound Governance Token

Risk-Adjusted Performance

0 of 100

Very Weak

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

LEO Token

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LEO Token are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LEO Token exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compound Governance and LEO Token

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

The idea behind Compound Governance Token and LEO Token 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.