Correlation Between Quant and Loopring

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

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

Diversification Opportunities for Quant and Loopring

0.9

Correlation Coefficient

Quant  Loopring

Almost no diversification

The 3 months correlation between Quant and Loopring is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Quant and Loopring in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loopring and Quant 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 Quant are associated (or correlated) with Loopring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loopring has no effect on the direction of Quant i.e., Quant and Loopring go up and down completely randomly.

Pair Corralation between Quant and Loopring

Assuming the 90 days trading horizon Quant is expected to generate 0.8 times more return on investment than Loopring. However, Quant is 1.25 times less risky than Loopring. It trades about 0.04 of its potential returns per unit of risk. Loopring is currently generating about 0.01 per unit of risk. If you would invest  7,238  in Quant on January 27, 2024 and sell it today you would earn a total of  3,734  from holding Quant or generate 51.59% return on investment over 90 days.

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

Quant  vs.  Loopring

Quant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Loopring

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Loopring are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Loopring exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Quant and Loopring

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

The idea behind Quant and Loopring 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.