Correlation Between DOT and Grass

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

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

Diversification Opportunities for DOT and Grass

0.65

Correlation Coefficient

DOT  Grass

Poor diversification

The 3 months correlation between DOT and Grass is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding DOT and Grass in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grass and DOT 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 DOT are associated (or correlated) with Grass. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grass has no effect on the direction of DOT i.e., DOT and Grass go up and down completely randomly.

Pair Corralation between DOT and Grass

Assuming the 90 days trading horizon DOT is expected to generate 0.55 times more return on investment than Grass. However, DOT is 1.83 times less risky than Grass. It trades about 0.01 of its potential returns per unit of risk. Grass is currently generating about -0.08 per unit of risk. If you would invest  426.00  in DOT on April 25, 2025 and sell it today you would lose (14.00) from holding DOT or give up 3.29% of portfolio value over 90 days.

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

DOT  vs.  Grass

DOT

Risk-Adjusted Performance

Very Weak

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

Grass

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grass 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 fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for Grass shareholders.

Pair Trading with DOT and Grass

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

The idea behind DOT and Grass 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.