Correlation Between GT and Layer3

Can any of the company-specific risk be diversified away by investing in both GT and Layer3 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 GT and Layer3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GT and Layer3, you can compare the effects of market volatilities on GT and Layer3 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 GT with a short position of Layer3. Check out your portfolio center. Please also check ongoing floating volatility patterns of GT and Layer3.

Diversification Opportunities for GT and Layer3

0.78

Correlation Coefficient

GT  Layer3

Poor diversification

The 3 months correlation between GT and Layer3 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding GT and Layer3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Layer3 and GT 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 GT are associated (or correlated) with Layer3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Layer3 has no effect on the direction of GT i.e., GT and Layer3 go up and down completely randomly.

Pair Corralation between GT and Layer3

Assuming the 90 days horizon GT is expected to under-perform the Layer3. But the crypto coin apears to be less risky and, when comparing its historical volatility, GT is 4.75 times less risky than Layer3. The crypto coin trades about -0.17 of its potential returns per unit of risk. The Layer3 is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6.83  in Layer3 on April 24, 2025 and sell it today you would lose (1.99) from holding Layer3 or give up 29.14% of portfolio value over 90 days.

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

GT  vs.  Layer3

GT

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT 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 GT shareholders.

Layer3

Risk-Adjusted Performance

Very Weak

Over the last 90 days Layer3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Layer3 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GT and Layer3

The main advantage of trading using opposite GT and Layer3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GT position performs unexpectedly, Layer3 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 Layer3 will offset losses from the drop in Layer3's long position.

The idea behind GT and Layer3 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.